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3 big fully franked dividend shares I’d buy to beat the pathetic returns on cash

This afternoon the Reserve Bank of Australia cut Australia’s benchmark cash lending rate to a record low of just 1% which means the banks are likely to offer cash savers or term depositors even lower rates of return.

For example the National Australia Bank Ltd (ASX: NAB) currently offers just 1.3% on its callable cash savings accounts or 1.9% on a 12-month term deposit. At these kind of joke rates once you adjust for inflation around 1.3% your money is worth pretty much nothing or potentially even eroding in value!

No wonder so many people are looking to fully franked dividends to smash the pathetic returns on cash.

But it’s no use blindly buying fully franked dividend shares if they might erode in value. You must stick to the basics of buying good companies on reasonable valuations.

Here are three I’d happily put a little money into today as part of a balanced investment portfolio.

Accent Group Ltd (ASX: AX1) is the footwear retailer that can grow via wider margins, more sales, or new store openings. It sells for $1.39 today and offers a trailing yield of 5.9% plus full franking credits which is pretty impressive given its guiding for another year of strong double-digits profit growth.

I expect the stock looks conventionally cheap as sentiment around the consumer-facing retail sector is low, however, this may present an opportunity to anyone with a 3 to 5 year time horizon.

ARB Corporation Ltd (ASX: ARB) is a founder-led 4-wheel drive automobile parts supply business that has a long track record of fully franked dividend growth. Much of its growth is also organic and it has no net debt which is a common positive of founder led businesses. 

Dicker Data Ltd (ASX: DDR) is another founder-led IT hardware distribution business that pays quarterly fully franked dividends and offers an estimated annual yield of 4.2% plus franking credits based on a share price of $5.34. It’s also forecasting another strong year of double-digit profit growth to mean it could offer solid total returns to investors over 3 to 5 years.

Of course all three of these businesses carry plenty of downside risks as well, so I would not suggest betting the house on any of them. However, I’d certainly prefer putting some cash in them over leaving too much at the bank.

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Motley Fool contributor Tom Richardson owns shares of Accent Group and Dicker Data Limited. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia has recommended Accent Group and ARB 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 Scott Phillips.

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