It’s now been more than two years since the Reserve Bank of Australia (RBA) has moved interest rates. And the RBA seems pretty happy with the economy chugging along as it is, not too hot, not too cold.
This means a rate increase is probably a fair way off. So the rates on term deposits will continue to be very low for the foreseeable future. You could always invest in property, but the rental yield after costs isn’t much better than a term deposit in most cases.
The best place to invest for income is the Aussie sharemarket. So here are 2 examples of high yield shares worth considering.
Aventus Retail Property Fund (ASX: AVN)
Aventus is the owner of 20 large format retail centres (think big, bulky products) around Australia worth $2 billion. The portfolio is tenanted with a diverse mix of strong retailers including Bunnings Warehouse, Good Guys, Harvey Norman Holdings Limited (ASX: HVN) and Nick Scali Limited (ASX: NCK), with no tenant making up more than 4% of the rental income.
More than 85% of leases have contracted rent increases, with either a fixed rate or CPI. Management has noted that there is a large amount of excess site space available across the portfolio which provides further opportunities for development or optimisation.
Aventus expects to pay a distribution of 16.6 cents per share this financial year, which means shares are trading on a yield of 8%.
BKI Investment Co Ltd (ASX: BKI)
This listed investment company holds a diversified portfolio of Aussie shares from a range of sectors, focusing mostly on those with strong yields. And it’s not as bank heavy as you might think, with only 22% of the portfolio currently made up of banks.
BKI aims to regularly increase the dividend paid to shareholders over time and charges very low management fees – its total expense ratio for FY 2018 was just 0.16%. The dividend has been steadily increased each year since the GFC.
The appeal here is, you get a ready-made portfolio of higher yield shares and a reliable dividend stream, with no effort involved. For retirees looking for a simple way to get a decent level of income, this is a good option in my view.
BKI trades at a slight discount to NTA and a dividend yield of 7.1%, including franking credits.
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Motley Fool contributor Dave Gow owns shares of AVENTUS RE UNIT and BKI Investment Company Limited. The Motley Fool Australia has recommended AVENTUS RE UNIT. 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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