The Reserve Bank of Australia (RBA) has just cut its interest rate again, so it could be time to consider buying the Vanguard Australian Share ETF (ASX: VAS) for dividends.
It's getting harder to pick individual ASX blue chip shares for dividends because some of the only ones that offer higher yields are the ones that are most likely to cut their dividends.
So, the best route could be to own a diversified portfolio by buying an exchange-traded fund (ETF) such as the Vanguard Australian ETF.
It looks to track the S&P/ASX 300 Index, so it's normally invested in around 300 businesses. Some of its top holdings include Commonwealth Bank of Australia (ASX: CBA), CSL Limited (ASX: CSL), BHP Group Ltd (ASX: BHP), Woolworths Group Ltd (ASX: WOW), Telstra Corporation Ltd (ASX: TLS) and Macquarie Group Ltd (ASX: MQG).
Australian businesses are known for their dividends because of their higher dividend payout ratios and lower valuations. Unlike the US where many of the big businesses are high-growth tech shares, around half of the ASX 300 is weighted towards high-yield financials and resource businesses.
The Vanguard Australian Share ETF has a partially franked dividend yield of 4% thanks to shares like BHP, NAB and Telstra paying a good dividend to the ETF which then passes it through to investors.
However, whilst the yield is high there isn't likely to be much growth of the dividend in the shorter-term because many resource businesses are probably near the top of the cycle and banks are having trouble growing their cash profit.
Foolish takeaway
The Vanguard Australian ETF is not a bad option for dividends, but I think it relies too much on the payouts from the big banks and large resource businesses. I'd rather buy shares like Future Generation Investment Company Ltd (ASX: FGX).
