Luckily in this low interest rate environment, there are plenty of shares on the ASX paying generous dividends.
Two which I think would be top options for income investors right now are listed below. Here’s why I like them:
BHP Group Ltd (ASX: BHP)
I think this mining giant is a great dividend share to buy. This is because the Big Australian looks well-positioned to generate strong free cash flows in FY 2020 and FY 2021 thanks to its low cost operations and favourable commodity prices.
The latter is particularly the case for iron ore, which is currently trading at ~US$100 a tonne. This compares to the company’s full year cost guidance of just US$13-14 per tonne at its Western Australia Iron Ore operation. Based on the current BHP share price, I estimate that its shares offer investors a forward fully franked ~5% dividend yield.
BWP Trust (ASX: BWP)
Another dividend share that I would buy is this commercial property trust. BWP is the largest owner of Bunnings Warehouse sites in Australia with a total of 68 leases. While having such a reliance on a single customer can be a risk, in this case I see it as a strength. This is because Bunnings is owned by Wesfarmers Ltd (ASX: WES), which is also a major shareholder of BWP. I believe this means it is highly unlikely to do anything that would impact its investment.
In addition to this, given the quality of the Bunnings business and its positive outlook, I feel the risk of rental defaults and mass closures is extremely low. All in all, I think this leaves BWP well-placed to grow its distribution at a modest rate each year for the foreseeable future. For now, based on the latest BWP share price, I estimate that it offers investors a 4.75% FY 2021 yield.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
More reading
- ASX 200 Weekly Wrap: Afterpay, Tech push ASX 200 back above 6,000
- 5 things to watch on the ASX 200 on Monday
- 5 ASX shares rated as strong buys by brokers
- 3 ASX dividend shares to buy before the next RBA meeting
- Diversify your portfolio with BHP, ResMed, and Wesfarmers shares
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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