According to the latest cash rate futures, the market is currently pricing in a 56% probability of a rate cut to zero next month.
If this were to happen, I feel it would put a lot of pressure on the banks to cut interest rates. Which certainly would be another blow to income investors.
But don’t worry because these ASX dividend shares could be a great way to beat falling rates:
Fortescue Metals Group Limited (ASX: FMG)
I think Fortescue could be a good option for income investors. Iron ore prices have been resilient during the pandemic, putting the miner in a strong position to deliver another strong result in FY 2020. And thanks to the strength of its balance sheet, I suspect Fortescue will be returning most of its free cash flow back to shareholders. I estimate that it will pay a dividend that will yield in the range of 6% to 8% in FY 2021. Though, this is dependent on iron ore prices remaining relatively robust over the next 12 months.
Rural Funds Group (ASX: RFF)
Another option for income investors to buy is Rural Funds. I think the agriculture-focused property group would be a great long term option due to its high quality property portfolio and their ultra long tenancy agreements. At the end of the first half its weighted average lease expiry stood at 11.5 years. In FY 2021 the company intends to lift its distribution to 11.28 cents per share. This works out to be a forward 5.9% distribution yield.
Wesfarmers Ltd (ASX: WES)
A final dividend share to buy is Wesfarmers. I think the conglomerate is a great option for income investors due to the quality and positive outlook for the majority of its businesses. Another positive is that Wesfarmers is sitting on a big pile of cash. I suspect these funds will be used to make earnings accretive acquisitions in the next 12 months to bolster its growth. At present I estimate that its shares offer a fully franked forward 3.9% dividend yield.
And here is a fourth dividend share which could be a perfect one to own in the current environment.
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Edward has just named what he believes is the number one ASX dividend stock to buy for 2020.
This fully franked “under the radar” company is currently trading more than 24% below its all time high and paying a 6.7% grossed up dividend
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*Returns as of 7/4/20
More reading
- 3 top ASX dividend shares to buy next week
- Should you invest in ASX shares for income?
- 2 quality ASX dividend shares for retirement income
- Are these China-exposed ASX shares in danger in 2020?
- Get paid huge amounts of cash to own these ASX dividend shares
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of 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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