At present the base rate on an Australia and New Zealand Banking GrpLtd (ASX: ANZ) term deposit is just a paltry 0.75% per annum
With a rate as low as that, it is almost impossible for investors to generate a sufficient income to live from.
For example, even if you were to invest $2 million into these term deposits, you’d only receive $15,000 back at the end of the term.
Fortunately, better yields can be found on the Australian share market.
Two ASX dividend shares that I would buy are listed below. Here’s why I like them:
BWP Trust (ASX: BWP)
I think BWP Trust would be a great alternative to a term deposit. It is the largest owner of Bunnings Warehouse sites in Australia with a portfolio of 68 stores leased to the hardware giant. I think Bunnings is a quality tenant to have, especially given how it has thrived during the pandemic. Combined with government stimulus, which is supporting the home improvement market, I believe there is a very low risk of rental defaults or stores closures in the near term. This should mean BWP is in a position to continue growing its income and distribution at a solid rate for the foreseeable future. Based on the current BWP share price, I estimate that it offers a generous 4.7% FY 2021 distribution yield.
Transurban Group (ASX: TCL)
Another ASX dividend share to consider buying instead of a term deposit is Transurban. While it has had a tough few months because of the pandemic, with restrictions now easing, traffic volumes and toll revenues have been recovering. I’m not overly confident the company will pay a final distribution in FY 2020, but I expect its distributions to return to attractive levels next year. I now expect the company to pay shareholders a 44 cents per unit distribution next year. Based on the current Transurban share price, this equates to a 3.2% distribution yield.
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More reading
- BKI Investment share price rises despite 35% drop in FY20 profit
- Why this fundie sees an ASX bank share recovery
- Are Transurban shares a hot buy today?
- Forget property! I’d buy these ASX dividend shares instead
- Why Goldman Sachs’ revenue surge bodes well for the Macquarie Group share price
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. 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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