5 ASX dividend shares to beat low interest rates

Finding a decent return has been difficult for savers and retirees in the past few years. After all, interest rates have been reduced to their lowest levels on record, leaving little in the way of interest payments for retirees to live off.

Unfortunately, the situation became even worse at the beginning of this month when the Reserve Bank of Australia elected to cut interest rates again to just 1.75%. Worse still, there are growing expectations that the cash rate could fall to just 1%, or perhaps even lower, in the not too distant future.

In other words, what were already dismal returns are going to get even worse…

Of course, there are ways to offset this issue. One of the best ways to counter low interest rates is to invest in businesses trading on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) that also offer solid dividend yields – particularly of the fully franked kind.

Here are five ideas for you to consider:

  1. Telstra Corporation Ltd (ASX: TLS) is, in many respects, an obvious inclusion to this list. As Australia’s leading telco, the company generates strong cash flows and a very reliable dividend yield. It currently yields around 5.5%, fully franked.
  2. Retail Food Group Limited (ASX: RFG) is the master franchiser behind a number of food and coffee chains, including Gloria Jeans and Crust Pizza. It also enjoys reliable revenue and cash flows and is currently yielding 4.5% fully franked, grossed to 6.4%.
  3. Wesfarmers Ltd (ASX: WES) is one of the oldest businesses on the ASX, proving its resilience through numerous wars and recessions. It also owns businesses such as Coles and Bunnings Warehouse which continue to generate moderate growth, despite the growing presence of competition. With the added potential of further capital gains, Wesfarmers’ shares offer a generous 5.1% fully franked dividend yield.
  4. Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is another business that has withstood the test of time, and is often regarded as Australia’s closest version of Warren Buffett’s Berkshire Hathaway. Run by a top management team, this business offers diversification, growth and a fully franked dividend yield of 3.2%.
  5. Westfield Corp Ltd (ASX: WFD) owns and operates Westfield-branded shopping centres in the United States and the United Kingdom, providing investors with some attractive geographic diversification. As such, investors should also benefit from a weaker Australian dollar. Based on today’s exchange rate of around US 72 cents, the shares offer a 3.3% dividend yield (albeit unfranked).

Of course, there are plenty of other shares to choose from for investors seeking higher returns -- they are by no means limited to the list of companies mentioned above.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Berkshire Hathaway. Motley Fool contributor Ryan Newman owns shares of Retail Food Group Limited. The Motley Fool Australia owns shares of Retail Food Group Limited. 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 Bruce Jackson.

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