According to the latest cash rate futures, the market is currently pricing in a 57% probability of a rate cut to zero next month.
While I’m not convinced that another rate cut is coming, I feel quite sure that rates will be staying at these ultra low levels for the foreseeable future.
This is good news for borrowers, but the very opposite for savers and income investors who will have to live with meagre interest rates for some time to come.
Fortunately, the Australian share market is home to a large number of dividend shares with generous yields. Two which I would buy today are listed below:
Australia and New Zealand Banking GrpLtd (ASX: ANZ)
If you don’t have exposure to the banking sector already, then I think ANZ would be worth considering. With its shares down by a third from their 52-week high, I estimate that they are changing hands for 13x estimated FY 2021 earnings and 0.9% FY 2021 book value. This is lower than average and a level that I think is attractive for patient investors.
Another positive is that although it is highly likely to cut its dividend materially next year, its share price decline means it should still offer an above-average yield. As things stand, I expect ANZ to pay a partially franked dividend of $1.05 per share next year. This equates to a 5.5% yield today.
BWP Trust (ASX: BWP)
Another dividend share to consider buying is BWP Trust. It is a real estate investment trust which owns 75 properties across Australia. The majority of its properties are warehouses that are leased to the Wesfarmers Ltd (ASX: WES) owned Bunnings business. At the last count the company’s occupancy rate stood at 97.5% and it was generating over $150 million in rent each year.
While having the majority of your properties leased to a single customer is usually a risk, I don’t believe it is anything to be too concerned about. This is because Wesfarmers is a major BWP shareholder with a stake of almost 24% and unlikely to do anything that would negative impact its investment. All in all, I’m confident BWP can continue growing its income and distribution at a modest rate for the foreseeable future. At present I estimate that its shares offer investors a forward 4.9% yield.
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More reading
- Next phase of bull market could see ANZ Bank outperform Afterpay
- The next ASX sector at risk of cutting dividends
- ASX 200 down 0.1%: Carsales update impresses, a2 Milk surges higher
- Is the ANZ share price a buy today?
- Can ASX big banks generate an attractive sustainable dividend yield from FY21?
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.
The post Beat the cash rate cuts with these top ASX dividend shares appeared first on Motley Fool Australia.
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