With the cash rate tipped to be taken even lower by the Reserve Bank of Australia in the very near future, I don't think it will be long before the interest rates on offer from savings accounts and term deposits become less than inflation.
If this does occur, it will mean that the value of any money locked up in these interest-bearing assets will actually diminish in real terms after adjusting for inflation.
Because of this, I continue to believe that dividend shares are the best way for investors to generate an income in this low interest rate environment.
And three dividend shares I would buy right now are as follows:
Coles Group Ltd (ASX: COL)
This supermarket giant's shares have risen strongly in recent weeks thanks to a solid quarterly update and a positive reaction to its refreshed strategy to deliver on its vision of becoming the most trusted retailer in Australia and grow long-term shareholder value. Despite this solid rally, I don't believe it is too late to consider a long term and patient investment in its shares. This is due to cost cutting opportunities, its focus on automation, defensive qualities, positive long-term outlook, and favourable dividend policy. I estimate that Coles' shares currently provide a forward fully franked ~3.9% dividend yield.
Lendlease Group (ASX: LLC)
Lendlease is an international property and infrastructure company which I think could be worth considering. Although FY 2019 has been a year to forget for the company, I believe it is over the worst of its issues now and feel its outlook has started to improve greatly. Especially given its recent agreement with tech behemoth Google. The ~$20 billion project will see the company develop the tech giant's landholdings in San Jose, Sunnyvale and Mountain View into mixed-use communities. I expect this to underpin solid earnings and dividend growth in the future. At present I estimate that its shares offer a fully franked 4.6% FY 2020 dividend yield.
Westpac Banking Corp (ASX: WBC)
Another company which I believe has an improved outlook is Westpac. Following favourable moves by APRA in recent weeks and the expected rebound in the housing market, I feel confident that from FY 2020 Westpac can deliver modest earnings and dividend growth over the coming years. This could make it worth considering if you don't already have meaningful exposure to the banks, especially with its shares offering a very generous trailing fully franked 6.5% dividend yield.
