At present, Westpac Banking Corp (ASX: WBC) is offering 0.7% per annum yields on its 12-month term deposits. This is broadly in line with what other banks are offering.
This means that even if you invested $1 million into these term deposits, you’d only get $7,000 of income from them annually.
Fortunately, the Australian share market is home to a number of ASX dividend shares which offer vastly superior yields.
Three dividend shares which I think would be great as part of a balanced income portfolio are listed below. Here’s why I would buy them:
BWP Trust (ASX: BWP)
The first ASX dividend share to consider buying is BWP. It is a real estate investment trust with a focus on warehouses. The majority of its properties are leased to hardware giant Bunnings, which I believe is one of the highest quality retailers in the country. Bunnings has been a strong performer during the pandemic and looks well-positioned to continue this positive form over the long term. In light of this, I think BWP is well-positioned to grow its rental income and distribution at a solid rate over the next decade. Based on the current BWP share price, I estimate that it offers investors a forward 4.5% yield.
Fortescue Metals Group Limited (ASX: FMG)
Another option for income investors to consider buying its Fortescue. I believe it is a great option due to the quality of its operations and the high prices that iron ore is commanding at present. With the iron ore price trading above US$120 a tonne, Fortescue is well-placed to generate high levels of free cash flow in FY 2021. The majority of this is likely to be returned to shareholders in the form of dividends. In light of this and the current Fortescue share price, I would expect a forward fully franked dividend of 5% to 6%.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
A final option to look at is the Vanguard Australian Shares High Yield ETF. It invests in a total of 66 high yielding dividend shares from a range of different sectors. This includes mining giants, the banks, and blue chip favourites. I like the fund because of the diversity it gives investors. Something which the pandemic has proven is very important to have. I estimate that its units offer a forward dividend yield of 4% to 5%.
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More reading
- How to earn a passive income of $50,000 with ASX dividend shares
- ASX 200 plunges 3.1%, Afterpay suffers
- The best dividend shares to buy today
- Insiders have been buying Fortescue and this ASX share
- Fortescue share price drops lower despite positive update
Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. 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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