With the Reserve Bank of Australia cutting interest rates in June, July and who knows when next, it sure is a trying time to save cash or get a steady income. In fact, with your average term deposit struggling to cough up more than 2%, you may as well split your money between ASX dividend shares and a Cal-King mattress.
Here are three ASX dividend shares to buy for the former option (if you’re after the latter, try Forty Winks).
Commonwealth Bank of Australia (ASX: CBA)
I like Commbank shares firstly because its grossed-up dividend yield of 7.6% puts its own savings accounts to shame, and secondly because CBA is the only ‘Big Four’ bank to show a consistent pattern of dividend growth. For an income investor, what more could you ask for? Although there are perennial concerns over the future profitability of our big banks, the fact remains that Commonwealth Bank has a formidable market share, strong branding and enviable pricing power in the financial services industry.
Coles Group Ltd (ASX: COL)
I have been impressed with the freshly independent Coles since it was spun-off from parent company Wesfarmers Ltd (ASX: WES) last November. Coles has shown it has what it takes to successfully fly the nest, unveiling promising plans for supply chain automation, in-store promotions (hello, Little Shop 2.0) and cost-cutting programs over the last 6 months. Coles has also stated that it plans on paying out 80%-90% of its earnings going forward, so this should result in a healthy 4%-5% dividend later this year (watch this space).
Transurban Group (ASX: TCL)
Transurban is your typical ‘safe dividend’ stock. Shares of this toll-road operator have surged 28% year-to-date, as investors chase its iron-clad dividend, which has been beaten down to 3.97% by the surging price (although still smashes a term deposit). Although shares are now very expensive by traditional measures, there is still a lot to like about the company, particularly as the new WestConnex tunnels in Sydney came online this week.
I think any of these dividend shares would make a fine addition to an income-producing portfolio. On today’s prices, I would probably go with CommBank, but with today’s share market, it’s hard to be picky when it comes to yields.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Transurban Group and Wesfarmers 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.