Based on current cash rate futures contracts, it is starting to look as though the Reserve Bank of Australia is going to open the new financial year with a cut to 1%.
Unfortunately for savers, if the economics team at National Australia Bank Ltd (ASX: NAB) is to be believed, this is the first of two further rate cuts that the central bank will make by the end of the year.
Two more cuts would bring the cash rate down to 0.75% and put a lot of pressure on the interest rates offered with savings accounts and term deposits.
In light of this, I think income investors might want to switch their funds into one of these three top dividend shares:
Australia and New Zealand Banking Group (ASX: ANZ)
Although this banking giant’s shares have rallied notably higher since the start of the year, they still trade on below average multiples and provide investors with a trailing fully franked 5.7% dividend yield. I think this is a very attractive yield in the current low interest rate environment, potentially making it one of the better options on the market. Especially if the housing market rebounds next year. This could lead to solid mortgage loan growth which, combined with cost cutting and share buybacks, could give its bottom line a big boost.
BHP Group Ltd (ASX: BHP)
If you’re not opposed to investing in the resources sector, then I think you ought to consider buying this mining giant’s shares. I estimate that BHP’s shares will provide investors with a fully franked 3.6% dividend in FY 2020. However, this does not include special dividends, which I think are a real possibility given the large amount of free cash flow the company is generating thanks to favourable commodity prices.
Rural Funds Group (ASX: RFF)
A third dividend share to consider buying in FY 2020 is Rural Funds. It is an owner of a portfolio of high quality agricultural assets including cattle production, vineyards, and orchards. I’m a big fan of the company due to its long-term leases and use of rental indexation. I believe this leaves it well-positioned to grow its distribution at a solid and predictable rate for the foreseeable future. At present, its units offer investors a 4.6% forward distribution yield.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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.