Forget term deposits! I’d buy these two ASX 200 shares instead

S&P/ASX 200 Index (ASX: XJO) shares can be more attractive for passive income than a term deposit for a few different reasons.

Stocks can provide a larger dividend yield, payout growth, and hopefully capital growth. Term deposits are limited to the guaranteed income they provide – there’s capital protection but no further potential returns.

Some businesses can deliver stable (and growing) earnings, which provides the tailwind for both dividend and share price growth. The two ASX 200 shares below are appealing options.

Telstra Group Ltd (ASX: TLS)

Telstra is Australia’s leading telecommunications business, with significant advantages over competitors. It has the widest network coverage, the best spectrum assets, the most subscribers, and more.

The company has defensive earnings, in my opinion, due to the fact that many households, businesses, and other organisations seem to place a high importance on having an internet connection.

Telstra has a significant market share of both NBN and mobile connections, giving the business pleasing operating leverage. The more subscribers it has, the more its costs can be spread across those users, enabling a strong profit margin.

The regular growth of subscribers and average revenue per user (ARPU) is helping the company’s bottom line. Further digitalisation of the Australian economy could lead to further improvements in these metrics.

The Telstra mobile division delivered income growth of 3% to $11 billion and operating profit (EBITDA) growth of 5% to $5.3 billion in FY25, helping Telstra’s earnings per share (EPS) climb 3.2% to 19.1 cents and fund a 5.6% rise in the dividend per share to 19 cents.

I think there’s a good chance the ASX 200 share will hike its annual dividend per share again to approximately 20 cents in FY26. At the time of writing, this would be a forward grossed-up dividend yield of 5.9%, including franking credits.

Scentre Group (ASX: SCG)

This ASX 200 share is the owner of the Westfield shopping centres around Australia and New Zealand.

While retail isn’t one of the most resilient areas of the economy, I think rental income is defensive and predictable. Many of the retailers that lease one of the shops need to have a physical space to sell their items; otherwise, they wouldn’t have much of a business.

There isn’t any empty real estate to build another large shopping centre near existing Scentre locations in the city, so the Westfield locations don’t have much competition to worry about. Online shopping is a headwind, but click and collect sales still require the physical store, and Scentre can lease excess space for other activities beyond retail (such as food, entertainment, education, and so on) in the long term.

In its November update, it said that customer visitation for the 45 weeks to 9 November 2025 was 453 million, up 3.1% year over year. Total annual business partner sales across its portfolio to 30 September 2025 were $29.5 billion, up $760 million. Total business partner sales growth was 3.7%, with specialty sales up 4.4%.

Those are promising sales, which suggest the ASX 200 shares’ rental income can continue to grow, with a reported average specialty rent escalation of 4.4% in the nine months to 30 September 2025. Its portfolio occupancy is very high at 99.8%, up 40 basis points (0.4%) on the same period in 2024.

It expects to grow its 2025 distribution by 3% to 17.72 cents per security, translating into a distribution yield of 4.4%, at the time of writing.

The post Forget term deposits! I’d buy these two ASX 200 shares instead appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.