2 ASX 200 shares that could be great for dividends

Premier Investments and Carsales.Com could be two ASX 200 shares for income.

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A young entrepreneur boy catching money at his desk, indicating growth in the ASX share price or dividends

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The S&P/ASX 200 Index (ASX: XJO) shares that pay dividends could be a good place to search for income.

Some businesses are expected to pay healthy dividend yields over the next 12 months and beyond, with growth expected.

The below two companies are leaders in their industry and also are paying dividends to their shareholders:

Premier Investments Limited (ASX: PMV)

Premier Investments is one of the leading retailers in the ASX 200. It operates through a number of different brands including Smiggle, Peter Alexander, Just Jeans, Jay Jays, Portmans and Dotti. It also has sizeable holdings of Breville Group Ltd (ASX: BRG) and Myer Holdings Ltd (ASX: MYR). Premier recently increased its holding to more than 15% of Myer.

According to earnings estimates on Commsec, Premier Investments is expected to pay an annual dividend per share of $0.875 per share in FY22. That would equate to a grossed-up dividend yield of 4.6% for FY22.

Whilst its physical store network has been disrupted by COVID-19 since March 2020, Premier Investments has seen high levels of online sales growth which has helped increase profit margins. The company is looking forward to a global retail recovery from COVID-19, particularly for Smiggle which has been impacted by closed schools.

Around a month ago, the business gave a trading update for FY21. It said that its total global sales for the first 18 weeks of the second half of FY21 were up 70% on the comparable period in the second half of FY20 and up 15.8% on the comparable 18 weeks of the second half of FY19.

One of the highlights of the ASX 200 share’s update was that all 122 Smiggle stores in the UK and Ireland re-opened during April 2021 and May 2021.

It’s expecting that its retail FY21 earnings before interest and tax (EBIT) will be in a range of between $340 million to $360 million, pre-AASB16. That would represent growth of between 82% to 92% on the underlying FY20 EBIT.

This profit growth is being driven by a number of things including “strong” online sales growth and highly profitable online performance, “exceptional” gross margin expansion in the second half to date with an increase of over 380 basis points, and strong cost control (including reducing rent).

Carsales.Com Ltd (ASX: CAR)

Carsales says it’s the largest online automotive, motorcycle and marine classifieds business in Australia. It also has operations internationally, with stakes in leading online automotive classified businesses in Brazil, South Korea, Malaysia, Indonesia, Thailand and Mexico.

According to estimates on Commsec, Carsales is projected to pay an annual dividend per share of $0.516 in FY22. That translates to a grossed-up dividend yield of 3.5%.

One of the latest moves by the ASX 200 share was to acquire a 49% interest of leading US digital marketplace business Trader Interactive, funded through a $600 million capital raising. At the time of the announcement, the ASX 200 share said that the acquisition represents a strategically compelling opportunity for Carsales to further build out its international scale and industry diversification with exposure to attractive verticals in the US.

In terms of operating performance, Carsales continues to produce growth despite the impacts of COVID-19 on the business and the industry. In the first six months of FY21, it saw double digit earnings growth with adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 18% and adjusted net profit after tax (NPAT) growth of 17%.

The interim dividend was increased by 14% to 25 cents per share.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia has recommended carsales.com Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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