With the cash rate tipped to remain on hold for at least a couple of years, it looks as though income investors will have to contend with ultra low interest rates for some time to come.
But don’t worry! Because there are easy ways to beat these low interest rates on the Australian share market.
Two ASX dividend shares that offer vastly superior yields are listed below. Here’s why I would buy them:
Rural Funds Group (ASX: RFF)
One of my favourite dividend shares on the Australian share market is Rural Funds. It is a leading agriculture-focused property company which owns a total of 61 properties across five agricultural sectors including almonds, cattle, cropping, vineyards and macadamias. One of the main reasons I’m a fan of the company is its long leases. At the end of FY 2020 Rural Funds had a weighted average lease expiry of 10.9 years.
Combined with periodic rent increases and its high quality tenants, which include Treasury Wine Estates Ltd (ASX: TWE), I believe Rural Funds is well-positioned to grow its distribution at a consistently solid rate over the next decade. In FY 2021 the company intends to grow its distribution by 4% to 11.28 cents per share. Based on the current Rural Funds share price, this equates to a very attractive 5.1% yield.
Telstra Corporation Ltd (ASX: TLS)
Another ASX dividend share to consider buying right now is Telstra. Times have been hard for the telco giant over the last few years, but things are starting to improve greatly now. This is thanks to the easing NBN headwind, the simplification of its business, its cost cutting plans, and the arrival of 5G.
And while the pandemic is going to weigh on its performance slightly because of the loss of roaming revenue, I remain confident the company is well-positioned to return to growth in the near future. In the meantime, I’m optimistic that Telstra will change its dividend policy and continue to pay a 16 cents per share dividend in FY 2021. Based on the current Telstra share price, this will mean a generous fully franked 5.2% dividend yield.
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More reading
- 3 ASX dividend shares that have increased their payouts in 2020
- Rural Funds share price rises on FY20 results
- What are dividend shares and how do you find them?
- ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower
- Why I would buy CBA and this top ASX dividend share
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, Telstra Limited, and Treasury Wine Estates 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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