3 ASX dividend shares I'd buy to beat the RBA interest rate cut

I'd buy these 3 ASX dividend shares to beat the RBA interest rate cut.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With the RBA cutting interest rates again yesterday to 1%, I think it's important that people think about where else they can achieve the desired income.

There's no doubt that investing in ASX dividend shares is riskier, in the shorter-term at least, than cash. Values of shares can go down, quite rapidly in some cases. But don't forget they can go down too. 

That's why I'd be interested in the following ASX dividend shares instead:

Rural Funds Group (ASX: RFF)

Rural Funds has a projected FY20 distribution yield of 4.7% if the 10.85 cents per unit guidance comes to fruition.

The great thing about Rural Funds is that it's a real estate investment trust (REIT), meaning that it receives regular rental income from its tenants, giving it a secure income stream and good net rental visibility. Indeed, management confidently predict distribution growth of 4% per annum based on the rental indexation built into the contracts.

It has a weighted average lease expiry (WALE) of 11.4 years, suggesting long-term locked-in rental income.

With farms spread across multiple industries including cattle, poultry, cotton, vineyards, almonds and macadamias, Rural Funds seems like a quality & diversified REIT to me.

Magellan Global Trust (ASX: MGG)

A decreasingly attractive Australian interest rate could make the AUD fall, which could make overseas-focused investments more attractive. This listed investment trust (LIT) is one of the best-performing listed entities and could continue to do well with its global investment mandate.

It targets a 4% distribution yield for investors and is invested in global winners like Alphabet (Google), Facebook, Apple, MasterCard, Visa, Starbucks and Microsoft.

With a decent cash position, around 12% of the portfolio at the end of May 2019, I think Magellan Global Trust is a good option for defence, growth and income.  

Vitalharvest Freehold Trust (ASX: VTH)

Vitalharvest is a bit of a left-field choice. It's also a REIT, but it currently leases all of its farms to Costa Group Holdings Ltd (ASX: CGC) which it has a profit-share agreement with.  

Costa pays an 8% base rent for Vitalharvest's assets and also a 25% share of earnings before tax (EBT) from operations at the properties.

Currently some of the citrus farms are facing fruit fly issues and some of the berry farms are experiencing "crumbly" berries, but I think this means it could be an opportune time to buy shares whilst there are short-term concerns.

Over time I expect Vitalharvest will acquire additional farms that aren't leased to Costa, expanding its portfolio and adding diversification.

Foolish takeaway

At the moment, the investor in me would go for Vitalharvest because of the issues it's currently facing, which shouldn't take too long to resolve. Rural Funds could be an excellent income choice and Magellan Global Trust could produce strong total returns over the coming years.

Motley Fool contributor Tristan Harrison owns shares of COSTA GRP FPO, MAGLOBTRST UNITS, and RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and 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.

More on ⏸️ Dividend Shares

A boy hold money and dressed in business suit next to money bags on a desk, indicating a dividends windfall
⏸️ Dividend Shares

The Accent (ASX:AX1) dividend has lifted by 22%

The company will reward shareholders with an increased dividend...

Read more »

a woman sits in the driver's seat of a car with her arm resting on the door with a small smile on her face, looking out of the car.
⏸️ Dividend Shares

Carsales (ASX:CAR) share price records a modest rise on dividend slash

Australia's largest online automotive and marine classifieds business notches a conservative share price rise on its latest report.

Read more »

A young entrepreneur boy catching money at his desk, indicating growth in the ASX share price or dividends
Bank Shares

ASX 200 bank shares to follow suit after CBA dividend hike: expert

Dividend investors rejoice! This expert expects more dividends to come from ASX 200 bank shares...

Read more »

sad looking petroleum worker standing next to oil drill
Share Fallers

AGL (ASX:AGL) dividend slashed. Share price down 3% on Thursday

More headwinds for the energy giant as its dividend is now in the spotlight.

Read more »

A girl looks through a microscope at money.
⏸️ Dividend Shares

The ANZ (ASX:ANZ) share price has only gained 10% in 5 years. But have the dividends paid off?

We do the math to see if it has been worth investing in ANZ shares over the long term...

Read more »

man laying on his couch with bundles of money and extremely ecstatic about high dividend returns
⏸️ Dividend Shares

The NAB (ASX:NAB) share price is flat 5 years on. But have the dividends paid off?

We calculate if it has been worth investing in NAB shares over the long run...

Read more »

two children dressed in business attire with joyous, wide-mouthed expressions count money at a desk covered in cash and sacks of money either side.
⏸️ Dividend Shares

Top-10 ASX dividend share delivers market-thumping share price gains

The Holy Grail for income stocks is to return strong capital gains as well

Read more »

happy woman looking at her laptop with notes of money coming out representing financial success and a rising share price and dividend yield
⏸️ Dividend Shares

Mining shares in the ASX 200 might unearth US$26b worth of dividends

Are shareholders about to dig some dividends?

Read more »