ASX dividend shares are in high demand right now, with interest rates so low. I have two ideas for income in October 2021.
These are businesses that have intentions of paying good dividends to shareholders and look good value to me.
Magellan Financial Group Ltd (ASX: MFG)
This ASX dividend share has seen its share price decline by 27% since 16 August 2021. This has the useful feature of increasing the prospective dividend yield for investors.
Using the CommSec estimate for the 2022 financial year dividend, it’s expected to pay a partially franked dividend yield of 6.4% over the next 12 months.
I certainly think that dividend projection is possible, with more growth over time, because of the strength of its funds management business. Ignoring performance fees, Magellan’s funds management profit continues to rise thanks to a high profit margin and growing funds under management (FUM), which recently reached $118 billion.
The rising FUM is a key driver of profit and the normal dividend.
I also believe that growing profits from investments like Guzman y Gomez and Barrenjoey will help Magellan’s future profits and dividends.
Whilst Magellan may be higher ‘risk’ than my second pick for October 2021, I think the decline makes it good value as an ASX dividend share.
MFF Capital Investments Ltd (ASX: MFF)
MFF Capital is a leading listed investment company (LIC). The job of LICs is to invest in other shares on behalf of shareholders.
It’s very effectively managed by Chris Mackay who owns around $263 million of MFF shares, so he’s very aligned with ordinary investors (such as myself).
One of the attractive features of MFF Capital is the low costs. Its management costs are fixed and low for its size. As it gets bigger it becomes even cheaper in percentage terms.
The MFF Capital portfolio has done well over the long-term. It currently has holdings like Visa, Mastercard, Amazon, Home Depot, Microsoft, Alphabet and Facebook.
MFF’s board has said the intention is to raise the half-yearly dividend to 5 cents per share. When it gets there, the annual dividend will be 10 cents per share, translating to a fully franked dividend yield of 3.4%. That’s a solid starting yield for an ASX dividend share, which could keep rising.
