Finding a future ASX 200 dividend heavyweight can be a very rewarding activity indeed. Even if a company is readily increasing its dividends over time, its share price will follow suit.
As such, getting in early before these share price rises can make for a very happy ASX share portfolio indeed. But of course, like any successful investment strategy, this is easier said than done.
So let's look at an ASX 200 share today that one ASX expert reckons might fit this mould.
Alistair MacLeod of Wheelhouse Partners recently sat down with Livewire. When asked to name a sustainable dividend payer, MacLeod names Lottery Corporation Ltd (ASX: TLC). Lottery Corp was spun out of Tabcorp Holdings Ltd (ASX: TAH) earlier this year, so it's a relative newcomer to the S&P/ASX 200 Index (ASX: XJO).
MacLeod doesn't like the look of Lottery Corp's old parent company Tabcorp right now, calling it a "sell" and noting its "flat" dividend growth prospects. however, it was a different story when it comes to Lottery Corp.
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Why this expert thinks Lottery Corp shares are a winning ticket
Here's what MacLeod had to say on why he chose Lottery Corp shares as a future dividend winner:
It's actually a stock that hasn't paid a dividend yet and is not likely to in the next six months because a lot of the profits are still going back to Tabcorp. But looking forward, this is a regulated monopoly. It's expected to have around a 4% yield. If you think about the lottery business, most people know when you're buying a lottery ticket, it's a bit of a mug's game.
So the same logic goes, selling lottery tickets is a great business. If you look at the cash flows of this company, depreciation's higher than CapEx. So cash flows are bigger than earnings. So from an income investor's perspective, your cash flows can be 130% of what your profits are. I think there's a lot of runway for this stock from a dividend growth perspective in a very economically defensive environment or position.
MacLeod is asked whether a 4% dividend yield is attractive in these times of high inflation.
Here's what he said:
Well, it's a 4% yield that's also growing at 10%. And then you've got the capital base growing as well. So yes, I think it's a good place to be, even in an inflationary environment.
A future dividend heavyweight?
So Lottery Corp is a definite dividend winner in the eyes of this ASX expert. But MacLeod isn't the only one eyeing off Lottery Corp right now.
My Fool colleague Tony recently covered the views of fund manager Firetrail. Lottery Corp shares are currently held by Firetrail's Australian High Conviction Fund.
The fund manager likens Lottery Corp's cash flow stability to that of an infrastructure asset. "More importantly, revenues have shown resilience through periods of softer economic growth," the fundie said in a recent report.
So it seems this future ASX dividend share is getting a lot of love from investors right now.
