With interest rates continuing to slide, it has become almost impossible for income investors to generate a sufficient level of income from traditional interest-bearing assets.
The good news is that the Australian share market is home to a large number of dividend shares offering notably better yields.
Three that come highly rated are listed below. Here’s what you need to know about them:
Aventus Group (ASX: AVN)
Aventus is the owner and operator of 20 large format retail parks across Australia and counts major retailers such as ALDI, Bunnings, Officeworks, and The Good Guys as tenants. Its high weighting to everyday needs has been a huge positive this year and has allowed it to collect the majority of its rent as normal despite the pandemic.
Analysts at Goldman Sachs have a buy rating and $2.76 price target on its shares. They also estimate that the current Aventus share price currently offers a forward 6.1% dividend yield.
Fortescue Metals Group Limited (ASX: FMG)
Fortescue is one of the world’s leading iron ore producers. It has world class, ultra-low cost operations which have been generating high levels of free cash flow for many years. This is particularly the case this year, with iron ore price climbing to US$123.63 a tonne on Friday. This compares to Fortescue’s current C1 costs of US$12.74 per wet metric tonne.
At present, Macquarie has an outperform rating and $20.00 price target on its shares. It is forecasting a $1.64 per share fully franked in FY 2021. Based on the current Fortescue share price, this equates to a massive 8.8% dividend yield.
Telstra Corporation Ltd (ASX: TLS)
This telco giant has an increasingly positive outlook thanks to the easing of the NBN headwind, the arrival of 5G internet, and its T22 strategy. The latter is cutting costs and simplifying its business. Management also announced provisional plans to split into three separate entities. This is expected to unlock value for shareholders.
Credit Suisse appears to be a fan of its plan and recently put an outperform rating and $3.85 price target on its shares. It is also expecting the company to maintain its fully franked 16 cents per share dividend for the foreseeable future. Based on the latest Telstra share price, this represents a 5.1% dividend yield.
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Returns As of 6th October 2020
More reading
- The Telstra (ASX:TLS) dividend yield is 8 times greater than term deposits
- Telstra faces $50 million fine for ‘unconscionable conduct’
- 2 ASX dividend shares with 6%+ yields to buy
- Here’s why this broker says the Telstra (ASX:TLS) share price is cheap
- 2 cheap ASX shares to buy right now
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended AVENTUS RE UNIT. 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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