I continue to believe that income investors would be better off with ASX dividend shares than term deposits.
Especially given the outlook for interest rates in Australia. According to the latest weekly economic report by Westpac Banking Corp (ASX: WBC), it continues to see the cash rate remaining at 0.25% for a long time to come.
But which ASX dividend shares should you buy? Here are three that I would snap up today:
BWP Trust (ASX: BWP)
The first ASX dividend share to consider buying is BWP. It is a real estate investment trust with a focus on warehouses. Most of BWP’s warehouses are leased to hardware giant Bunnings, which is owned by Wesfarmers Ltd (ASX: WES). Interestingly, Wesfarmers is also a major BWP shareholder with a ~23.6% stake. I think this is a big positive as it is unlikely to do anything (vacate properties en masse, etc) that would negatively impact BWP’s performance and share price. At present I estimate that it offers investors a forward 5.2% yield.
Commonwealth Bank of Australia (ASX: CBA)
Another ASX dividend share to consider buying is Commonwealth Bank. Although the banks are struggling right now because of the pandemic, with the economy now reopening, I’m optimistic that the worst is behind them. Especially after they collectively announced billions of dollars of provisions over the last few weeks. And while Commonwealth Bank will almost certainly be forced to cut its dividend in FY 2021, the pullback in its share price means it is likely to still provide a very generous yield. I estimate that its shares offer a forward fully franked yield of 6.2%.
Rio Tinto Limited (ASX: RIO)
A final dividend share to consider buying is Rio Tinto. It feel it would be a great option for income investors that are not averse to investing in the resources sector. The mining giant has been a strong performer over the last few years and looks set to continue this trend in FY 2020. Especially given how iron ore prices remain at lofty levels despite the pandemic. I expect this to lead to strong free cash flows and big dividends for shareholders. In fact, last week Morgans suggested that iron ore prices could continue to rise and believes its shares currently offer a fully franked ~9% FY 2021 dividend yield.
And here is another dividend share which looks well-positioned to grow strongly during the pandemic. This could make it a must buy for income investors..
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More reading
- Top brokers name 3 ASX dividend shares to buy
- How $1,000 can be enough to change your money mindset
- Is the Wesfarmers share price a buy?
- How to turn $20k into $1.25 million in 10 years with ASX shares
- ASX 200 drops 1% on Friday
Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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