Finding a savings account or term deposit offering a yield of more than 5% is impossible these days. The best you could do would be around 1.8% per annum, by my reckoning. Thank record low interest rates. But the same cannot be said for ASX dividend shares.
Whilst a dividend-paying share does not offer the same kind of certainty as a term deposit, savings account or bond (far from it), you can be compensated by yields of 3, 4 or 5%. Never a settler, I’ve found 2 ASX dividend shares that indeed offer yields of more than 5% today, and will (in my view) well into the future.
2 ASX dividend shares offering yields over 5%
Telstra Corporation Ltd (ASX: TLS)
Telstra is our first dividend share offering a yield of more than 5%. The Telstra share price has not had a good month. Investors were spooked by the company’s pessimistic FY2020 earnings report released last month. Although Telstra did report an earnings slump of 9.7% and a 14.4% hit to profits, it also reaffirmed it’s 16 cents per share dividend. On current share prices, that would give Telstra a trailing dividend yield of 5.63% (or 8.04% grossed up with Telstra’s full franking).
Some commentators are assuming that Telstra will have to trim this dividend next financial year due to falling earnings. But looking at Telstra’s free cash flow, which should be more than enough to cover a 16 cents per share payout in FY21, I don’t agree with this thesis. Thus, I think Telstra remains a top dividend share to buy for income today. Especially at current 52-week low prices.
2) SPDR S&P Global Dividend Fund (ASX: WDIV)
Turning to an exchange-traded fund (ETF) now, here we have this globally focused income fund from SPDR. WDIV holds a basket of 75 dividend-paying shares from around the world, with only companies delivering steady or increasing dividends over the past decade selected. Canada and the United States are heavily weighted in this ETF, as well as Hong Kong and the United Kingdom. Some of WDIV’s holdings include Enagas, Nokian Tyres and Japan Tobacco, as well as our own AGL Energy Limited (ASX: AGL) and Commonwealth Bank of Australia (ASX: CBA).
I think getting exposure to dividend-paying shares outside the ASX bubble is a great way to bulk up and diversify an ASX income-focused portfolio. Remember, you’re not too diversified if all you hold is four ASX bank shares and a couple of miners. WDIV currently offers a healthy trailing dividend yield of 5.62% and charges a management fee of 0.5% per annum.
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More reading
- 2 fantastic ASX 50 shares I would buy today
- 3 top ASX shares I would love to buy this September
- UBS picks the best and worst ASX stocks from the reporting season
- Should you buy Telstra and these beaten down ASX shares?
- The Telstra share price just hit a 52-week low: Is it time to buy?
Motley Fool contributor Sebastian Bowen owns shares of SPDR S&P Global Dividend Fund and Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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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