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3 ASX dividend shares to buy with yields above 8.5%

Finding a good source of income is getting more difficult these days with the RBA cutting its interest rate to 1.25%. ASX dividend shares could be the answer.

Not only does the interest rate reduction make earning a decent income from bank interest almost impossible, but it also pushes up the price (and lowers the starting yield) of most ASX dividend shares.

That’s why I’m attracted to the idea of these ASX dividend shares, which still offer high yields, as buying ideas:

Naos Emerging Opportunities Company Ltd (ASX: NCC)

This is a listed investment company (LIC) which invests in some of the smallest shares on the ASX, meaning ones that have market capitalisations under $250 million.

The small cap end of the market has been underperforming in recent times compared to the ASX large caps and ASX tech sector, but that probably won’t always be the case.

With a focus on a small, high-conviction portfolio of quality industrial companies for the long-term I think that this Naos LIC could be a solid dividend option with a grossed-up dividend yield of 11.6%. It’s also trading at a 14% discount to its pre-tax assets at the end of April 2019.

As long as it has the profit reserve to keep paying, the dividends are likely to keep flowing. Its dividend has increased each year since FY13.

WAM Research Limited (ASX: WAX)

WAM Research is another LIC, it invests in small and medium ASX growth shares where it sees a catalyst that could boost the business’ share price.

Over the past seven years its portfolio has outperformed the All Ordinaries by an average of 7.3% per annum by delivering a return of 17.2% per annum in the 7-year timeframe before fees and expenses.

WAM Research pays out a lot of the market-beating profit it generates as a growing fully franked dividend. It currently has a grossed-up dividend yield of 10.2%.

Vitalharvest Freehold Trust (ASX: VTH)

Vitalharvest is a real estate investment trust (REIT) that owns farmland, specifically it wants to own farms that grow food like berries and citrus fruit as opposed to ones where farm animals are raised.

At the moment all of Vitalharvest’s farms are leased to Costa Group Holdings Ltd (ASX: CGC) and the REIT has a profit share agreement with the horticultural giant.

Costa recently reported some problems at its berry and citrus fruit farms, which has also sent the Vitalharvest share price down. This could be an opportune time to buy for the long-term whilst the expected Vitalharvest yield could be sitting at around 8.6%.

Foolish takeaway

I like to buy things at a discount to its value, both the Naos LIC and Vitalharvest looking interesting to me. If I had to pick one it would be Vitalharvest because I think the farm issues could be quite short-lived but farmland is likely to continue to be very economically useful, particularly if the global population keeps rising.

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Motley Fool contributor Tristan Harrison owns shares of COSTA GRP FPO. The Motley Fool Australia has recommended COSTA GRP FPO. 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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