Given the bleak outlook for interest rates, I continue to believe that ASX dividend shares are the best way for investors to generate an income in the current environment.
Luckily, there are plenty of quality options for investors to choose from right now.
Two that I would buy today are listed below. Here’s why I like them:
Dicker Data Ltd (ASX: DDR)
The first ASX dividend share to consider buying is Dicker Data. It is a leading distributor of computer hardware and software across the ANZ region that has been growing both its earnings and dividend at a quick rate over the last few years. Pleasingly, this has continued in 2020 despite the pandemic. In fact, just yesterday Dicker Data released its third quarter update and revealed year to date profit before tax growth of 28.3% to $60.8 million.
I believe it can continue its growth in FY 2021 and beyond thanks to its strong market position, growing vendor agreements, positive industry tailwinds, and new distribution centre. Once the latter is constructed it will give Dicker Data significant room to expand its operations and boost its revenues. For now, the company appears well-placed to increase its dividend to 35.5 cents per share this year. Based on the latest Dicker Data share price, this equates to a fully franked 3.9% dividend yield.
Rural Funds Group (ASX: RFF)
Another ASX dividend share I would buy is Rural Funds. It is an agriculture-focused property group that owns a number of properties across five agricultural sectors. These properties are of a very high quality and are leased on long term agreements to some of the biggest operators in the industry such as wine giant Treasury Wine Estates Ltd (ASX: TWE).
These tenancy agreements are a key reason why I think Rural Funds is a top option for investors. At the end of FY 2020, Rural Funds had a weighted average lease expiry (WALE) of 10.9 years. Given that these leases have rental increases built into them, the company has great visibility on its future earnings. In light of this, I believe it is well-positioned to continue growing its distribution by its 4% per annum target each year throughout the 2020s. For now, a distribution of 11.28 cents per share is expected in FY 2021. Based on the current Rural Funds share price, this works out to be a 4.75% yield.
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Returns As of 6th October 2020
More reading
- ASX 200 rises 1%, Cimic (ASX:CIM) up 8% on sale
- Dicker Data (ASX:DDR) share price reaches all-time high. Here’s why
- Why Dicker Data, South32, Tyro, and Uniti shares are pushing higher today
- 2 ASX shares I plan to hold til I’m 100
- 2 of the best ASX dividend shares to buy today
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and RURALFUNDS STAPLED. 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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