With the Reserve Bank of Australia (RBA) cutting interest rates to record lows and many pundits expecting a cash rate of 0.5% by the end of the year, it’s a bleak time for retirees, income investors or anyone who still thinks cash is king. These days, dividend-paying shares are the only real (conventional) way to generate strong cash flows north of 3%.
So here are 3 ASX dividend shares that offer investors a way out of the low-rate quagmire.
Coles Group Ltd (ASX: COL)
While Coles doesn’t have a knock-out starting yield, I think the reliability and defensiveness of Coles’ earnings base still makes it a great stock to own for dividend income. Although the grocery market is amongst the more recession-proof markets out there, cutthroat competition is also a huge factor to keep in mind. That’s why Coles is leaning on its new Smarter Selling cost cutting program to maximise its free cash flow and secure its dividend, which I believe will lead to a rising payout over time.
I estimate Coles is providing a forward yield of 3.5% on current prices.
Telstra Corporation Ltd (ASX: TLS)
While Telstra’s dividend is not what it used to be, the big telco is still offering a starting yield of 4.5% on current prices (partly enabled by Telstra’s historically low share price).
Still, I think Telstra is a great option for dividend income as I don’t expect any more dividend cuts to come through now that the NBN’s impact is clearer. Further, Telstra’s investment in the new 5G technology rollout could prove a lucrative earnings base over the coming decade, making this stock a promising buy for income now and in the future.
National Australia Bank Ltd (ASX: NAB)
NAB is one of the best bets in the ASX banking sector at the moment (in my opinion). The shakeup at NAB HQ has resulted in a new management team headed by the respected Ross McEwan – who I’m confident will do great things for the company after his successful stint at the Royal Bank of Scotland.
NAB also offers one of the better ASX banking yields at 6.4% on current prices (which grosses up to over 9% if you include franking), making this stock a fantastic source of dividend cash flow.
All 3 of these ASX stocks are great picks for dividend income today (in my opinion), and are well set up to deliver a nice stream of dividend cash flow well into the future. On current prices, I think Telstra and NAB are looking the most appealing, but Coles is also a great business to keep your eye on, going forward.
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Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited and Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of National Australia Bank 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.