Due to all the suspensions, deferments, and cancellations, estimating the average dividend yield of the Australian share market is difficult right now.
However, traditionally, the local share market would generally yield an average of approximately 4% each year.
While this is a fantastic yield in comparison to term deposits and savings accounts, you don’t have to settle for that.
Listed below are three top dividend shares which offer very generous yields. Here’s why I would buy them for income:
Commonwealth Bank of Australia (ASX: CBA)
I believe this banking giant would be a good option for income investors. Although the bank will almost certainly cut its dividend significantly in FY 2021, I believe it will still offer an above-average yield. At present I believe a dividend of $3.70 per share is possible next year. This equates to an attractive fully franked 5.3% yield.
Rio Tinto Limited (ASX: RIO)
Another dividend share to look at buying is this mining giant. Thanks to its strong balance sheet, sky high iron ore prices, and the expectation that prices will stay higher for longer, I believe Rio Tinto is likely to reward shareholders handsomely in FY 2020 and FY 2021. I estimate that its shares offer a forward fully franked dividend yield of at least 5%.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
A final dividend option is the Vanguard Australian Shares High Yield ETF. If you’re looking for high yield dividend shares, then you can’t go wrong with this exchange traded fund. It provides investors with low-cost exposure to 62 companies that have higher forecast dividends relative to other ASX-listed companies. This includes many of the most popular dividend options such as the banks and miners. I estimate that its units offer a forward dividend yield of at least 5%.
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More reading
- ASX 200 jumps 3%: CBA rebounds, Afterpay hits a new record high
- Why I would buy Wesfarmers and these ASX dividend shares
- Can ASX big banks generate an attractive sustainable dividend yield from FY21?
- ASX 200 down 0.3%: Big four banks mixed & Healius rockets on medical centre sale
- ASX 200 Weekly Wrap: ASX bears take control as market volatility returns
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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