With the Reserve Bank of Australia (RBA) this year slashing interest rates to all-time low of 0.75%, finding quality ASX dividend shares has rarely been more important for a portfolio. After all, it’s pretty hard finding another asset class that can give you an inflation-beating yield on capital these days outside the property market (and we all know how expensive that is right now).
So with that in mind, here are 2 ASX shares that offer not just inflation-beating returns, but dividend yields north of 9% – that’s nearly 9 times what you can expect from a term deposit in our current market!
Westpac Banking Corp (ASX: WBC)
Yes, Westpac isn’t anyone’s favourite investment right now. The allegations that surfaced recently are truly appalling and there’s not much doubt that this bank is facing a monster fine in the not too distant future. Still, with the bank’s recent cut to its shareholder payouts, its dividend looks a little more sustainable at $1.60 per share (on an annualised basis).
Whilst that’s not good news for existing Westpac shareholders, it means that on today’s prices WBC shares are offering a starting yield of 6.58%, or 9.4% grossed-up with Westpac’s full franking. Even if there’s additional cuts to the Westpac dividend going forward, the yield on cost for any Westpac shares bought at today’s prices would (in my opinion) still be substantial. Thus, I think there is a buying opportunity for WBC shares today.
WAM Capital Ltd (ASX: WAM)
WAM Capital is a listed investment company (LIC) specialising in undervalued ASX growth shares in the small- to mid-cap space. I like WAM Capital for its long history of outperformance (WAM shares have returned 16.8% per annum since 1999), which includes a market-leading dividend yield.
Since WAM Capital buys under-priced companies and sells them when a catalyst is realised, it is able to accumulate a profit reserve used to pay its large dividends. This year alone, WAM Capital has returned 15.5 cents per share to its owners, which translates int a 6.92% yield or 9.89% grossed-up. For this reason, I think WAM shares are a great choice for any income-focused investor today.
With these 2 ASX dividend shares, you are being offered grossed-up yields of over 9% on today’s prices, which is hard to ignore in today’s low rate world. If the RBA cuts interest rates further next year, I would be very happy holding these companies in my portfolio!
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.