We’ve just learned that the Reserve Bank of Australia (RBA) has cut the interest rate again by 0.25% to 0.75%.
Leaving money in a savings account may not be generating enough income any more, particularly once banks pass on the next cuts to the savings accounts.
I think we may need to look to ASX dividend shares to boost our cash returns from spare cash, such as these ideas:
Vanguard Australian Share ETF (ASX: VAS)
A broad Aussie index fund could be a relatively good way to play the lower interest rates, particularly as many large ASX businesses have a reputation for paying big dividends such as Westpac Banking Corp (ASX: WBC) and BHP Group Ltd (ASX: BHP).
Vanguard is a world leader in offering low-cost index funds that allow regular people like you and me to get access to share markets here and abroad, depending on the exchange-traded fund (ETF) you choose.
It has an annual management fee of only 0.10%, leaving most of the returns in the hands of investors. According to Vanguard, this ETF has a mostly-franked dividend yield of 4%.
Duxton Water Ltd (ASX: D2O)
Drought conditions are making it difficult for some regional areas of Australia and it has pushed the price of water entitlements up quite substantially over the past couple of years.
Duxton Water is the only business on the ASX to give a pure exposure to this theme because it owns water entitlements and leases them to farmers. It’s seeking to enter into more long-term water leases which should provide a fairly stable cashflow.
The company aims to pay a growing dividend to shareholders. It is currently increasing its payment every six months and has forecast the next dividend payment will be 2.8 cents per share. That means the next 12 months of dividends could amount to at least 5.6 cents per share, equating to a grossed-up dividend yield of 5.7%.
WAM Leaders Ltd (ASX: WLE)
If you’re after the relative safety of ASX blue chips, but want a more active approach to the buying and selling of shares, then WAM Leaders could be a good listed investment company (LIC) to think about. It’s operated by the high-performing Wilson Asset Management and invests in the larger businesses on the ASX.
Since inception in May 2016, the WAM Leaders portfolio has outperformed the S&P/ASX 200 Accumulation Index by an average of 1.2% per annum before fees, expenses and taxes.
The LIC structure allows WAM Leaders to pay out a majority of the profit generated in the form of a steadily growing dividend for income-seekers.
It has increased its dividend each year since FY17 and currently has a grossed-up dividend yield of 6.7%.
WAM Leaders clearly offers the biggest dividend yield and may be able to create steadily-growing dividends from here. But I’m drawn to Duxton Water for its unique offering and the fact it’s trading at a sizeable discount to its net asset value (NAV) per share.
Other top quality ASX dividend shares to consider are these income legends.
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Motley Fool contributor Tristan Harrison owns shares of DUXTON FPO. The Motley Fool Australia has recommended DUXTON FPO. 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.