While I think that Commonwealth Bank of Australia (ASX: CBA) would be a good option for income investors, not everyone is keen on the banks right now.
For those investors, I have picked out three non-bank dividend shares which I think would be good alternatives.
Here’s why I like them:
BWP Trust (ASX: BWP)
The first dividend share to consider buying is BWP. It is a real estate investment trust with a focus on warehouses. Most of its warehouses are leased to hardware giant Bunnings, which is owned by Wesfarmers Ltd (ASX: WES). I think Bunnings is arguably the highest quality retailer in the country and likely to stay in its warehouses for the long term. As a result, I believe BWP’s earnings are very defensive and it is well-placed to grow its distribution in the future. At present I estimate that it offers investors a 5.2% yield.
Coles Group Ltd (ASX: COL)
This supermarket giant could be a great alternative to the banks. Unlike the banks, it appears well-placed to continue its sales growth whatever economic conditions it is facing. In addition to this, with the company aiming to strip out costs materially and embrace new technologies, I expect its margins to improve over the next decade and support solid earnings and dividends growth. In FY 2021 I estimate that its shares will provide investors with a fully franked dividend yield of 4.2%.
Sydney Airport Holdings Pty Ltd (ASX: SYD)
A final option for income investors to consider is Sydney Airport. Although I suspect its dividends may be limited in 2020 due to the material decline in passenger numbers, I believe they will both bounce back in 2021 and 2022. This could make it worth being patient and buying shares with a long term view. A recent note out of Goldman Sachs reveals that it expects Sydney Airport to pay a 27 cents per share distribution in FY 2021 and then a more normal 37 cents per share distribution in FY 2022. This represents a 4.9% and 6.7% yield, respectively.
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More reading
- 5 things to watch on the ASX 200 on Friday
- 4 top ASX 200 shares for blue chip investors
- Leading broker names CBA shares as a sell
- Top brokers name 3 ASX shares to sell right now
- ASX 200 down 0.9%: Xero posts strong growth & Australian economy loses 594,300 jobs
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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