Earning an income from traditional interest-bearing assets like term deposits is becoming increasingly difficult.
Right now, Westpac Banking Corp (ASX: WBC) is offering 1% per annum yields on 12-month term deposits. This is broadly in line with what other banks are offering.
This means that even if you invested $1 million into these term deposits, you’d only get $10,000 of income from them.
Fortunately, the Australian share market is home to a number of ASX dividend shares which offer vastly superior yields.
Three dividend shares which I think would be great as part of a balanced income portfolio are listed below. Here’s why I would buy them:
Dicker Data Ltd (ASX: DDR)
Dicker Data is one of my favourite ASX dividend shares. It is a wholesale distributor of computer hardware and software which has consistently grown its earnings and dividends at a solid rate for many years now. This looks set to continue in FY 2020 with management intending to increase its full year dividend by 31% to 35.5 cents per share. This represents a 4.5% fully franked dividend yield.
Rio Tinto Limited (ASX: RIO)
Another dividend share to consider buying is Rio Tinto. It looks well-positioned to deliver strong profits in the near term thanks to sky high iron ore prices and its world class and low cost operations. Last month analysts at Morgans suggested that Rio Tinto’s shares could offer a fully franked ~8.5% FY 2021 dividend yield.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
A final option for income investors to look at is the Vanguard Australian Shares High Yield ETF. It invests in a wide range of high yielding dividend shares. This includes mining giants, the banks, and many other blue chip favourites. I like this exchange traded fund because of the diversity it gives investors. Which, as we have seen during the pandemic, is very important to have. I estimate that its units offer a forward dividend yield of at least 5%.
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More reading
- ASX 200 closes higher, banks keep rising
- Brokers name 3 ASX shares to buy today
- ASX 200 down 0.35%: UBS upgrades NAB and Westpac, Qantas soars again
- Is the Westpac share price too high?
- Why today might be a good day to buy NAB and Westpac shares
Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Dicker Data 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 Forget term deposits and buy these high yield ASX dividend shares appeared first on Motley Fool Australia.
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