If you're an income investor in search of dividend shares to buy, then you may want to look at the two options listed below.
Both shares are being recommended as buys by the team at Morgans. Here's what they are saying about these ASX 200 dividend shares:
Image source: Getty Images
South32 Ltd (ASX: S32)
The first ASX 200 dividend share that Morgans thinks is in the buy zone is South32. It likes the mining giant due to its attractive valuation and the robust prices it is enjoying across its basket of metals. Morgans notes that the latter is allowing the miner to increase its dividend, upsize its buyback, and strengthen its balance sheet.
While the broker acknowledges that the South32 share price has risen strongly in recent months, it still expects attractive dividend yields in the near future.
Morgans commented: "But despite the increase this share price rise has only matched S32's earnings growth. S32 is still trading on just 4x EBITDA and with a FCF yield of 11% (vs iron ore peers above 6x and pure base metal producers +10x EBITDA). While 'late to the party', we expect S32's share price to continue to re-rate as it completes its accretive copper acquisition and continues to enjoy cycle high FCF. We maintain our Add rating with S32 a preferred exposure in the mining sector."
Its analysts are forecasting fully franked dividends of 20.2 cents in FY 2022 and then 18.8 cents in FY 2023. Based on the current South32 share price of $4.57, this will mean yields of 4.4% and 4.1%, respectively.
Morgans has an add rating and $4.90 price target on its shares.
Westpac Banking Corp (ASX: WBC)
Another ASX 200 dividend share that Morgans likes is Westpac. It believes the banking giant's shares are cheap at the current level and is expecting them to provide a generous yield for investors.
In respect to its valuation, the broker feels the market is pricing Westpac as though it were a value trap. However, it feels its recent update demonstrates that this simply isn't the case and has retained its add rating and $29.50 price target.
Morgans said: "We believe the trading update supports the view that the challenges facing WBC are not unsurmountable and that the stock should not be priced like a value trap. We believe the update particularly serves to alleviate investor concerns around the cost outlook."
As for dividends, the broker is forecasting fully franked dividends per share of $1.19 in FY 2022 and then $1.60 in FY 2023. Based on the current Westpac share price of $23.53, this will mean yields of 5% and 6.8%, respectively.
