This afternoon the Reserve Bank decided against cutting the cash rate further and kept it on hold at 0.25%.
While this was a small win for income investors, it certainly doesn’t make life any easier for them.
At present Commonwealth Bank of Australia (ASX: CBA) offers interest rates of 1% per annum on a five-year term deposit. This is broadly in line with what you can find elsewhere with the other big four banks.
This kind of yield makes it very hard for investors to earn a sufficient income from term deposits.
But never fear, because the Australian share market is home to a large number of dividend shares which offer vastly superior yields.
Two which you can use to beat low interest rates are listed below:
Rural Funds Group (ASX: RFF)
The first dividend share to consider buying is this property company. Rural Funds is different to most property companies on the ASX. It has a focus on Australian agricultural assets and owns a diverse portfolio of high quality properties across different industries. These properties have ultra long leases and come with fixed rent increases built into them. This provides Rural Funds with a lot of earnings visibility. As a result, it has been able to provide distribution guidance for FY 2020 and FY 2021. The company plans to pay shareholders a distribution of 10.85 cents per share this year and then 11.28 cents per share next year. The latter equates to a 5.6% distribution yield.
Telstra Corporation Ltd (ASX: TLS)
Another dividend share to buy is Telstra. I think the telco giant is a great option for income investors due to its defensive qualities. These have been on display during the pandemic, with Telstra able to reaffirm its guidance for FY 2020 despite the crisis. In addition to this, with the NBN headwinds beginning to ease, I believe a return to growth is not too far away. In the meantime, I’m confident that its free cash flows are sufficient to maintain its 16 cents per share dividend. This equates to a fully franked 5% dividend yield.
And here is another dividend share that will help you beat low interest rates in 2020…
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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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But you will have to hurry — history has shown it can pay dividends to get in early to some of Edward’s stock picks, and this dividend stock is already on the move.
More reading
- How to value the big four ASX banks
- Why I would buy these ASX 200 blue chip shares in June
- 5 winning ASX dividend shares to buy in June
- How bankable are the big four ASX bank shares in 2020?
- This ASX fintech share is up 489% since March
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 and Telstra 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.
The post Smash low interest rates with these ASX dividend shares appeared first on Motley Fool Australia.
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