Do you know what the interest rate on a Commonwealth Bank of Australia (ASX: CBA) savings account is right now? It’s just 0.05% per annum.
This means that one million dollars in the bank’s NetBank Saver account would yield just $5,000 of interest each year.
And it isn’t just Commonwealth Bank. A series of cuts to the cash rate by the Reserve Bank means that all the banks are offering interest rates at a similar level.
As a result, if you’re looking for a source of income in this low interest rate environment, then you might want to take a look at the dividend shares listed below:
Coles Group Ltd (ASX: COL)
Coles is a big favourite of income investors due to its positive long term growth outlook and its defensive earnings. The latter was the main reason why Coles delivered strong growth in FY 2020 despite the pandemic. It reported a 6.9% increase in sales to $37.4 billion and a 7.1% lift in net profit after tax to $951 million in FY 2020. Pleasingly, it has followed this up with further strong sales growth in the first quarter of FY 2021.
Goldman Sachs is a fan of the company and has a buy rating and $20.50 price target on its shares. It is forecasting a fully franked 64 cents per share dividend in FY 2021. Based on the current Coles share price, this equates to a 3.5% dividend yield.
Wesfarmers Ltd (ASX: WES)
As with Coles, Wesfarmers has been a positive performer during the pandemic. This is thanks largely to its key Bunnings business, which has been experiencing very strong sales growth. The good news is that with the government providing home improvement stimulus and tax cuts, Bunnings has been tipped to continue its positive form over the coming years.
This should be supported by its other businesses, such as Kmart, Target, and Catch, which are all experiencing positive tailwinds of their own.
Analysts at Credit Suisse are expecting a strong result from the company in FY 2021. Its analysts recently retained their outperform rating and lifted the price target on its shares to $55.83. The broker has also pencilled in a $1.90 per share fully franked dividend. Based on the latest Wesfarmers share price, this will be a 3.7% dividend yield over the next 12 months.
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Returns As of 6th October 2020
More reading
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- 2 top 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 COLESGROUP DEF SET and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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