Times are bleak for Aussie income investors right now. Record low interest rates have reduced the range of investments that yield a safe return. And since ‘quantitative easing’ is the new buzz phrase that seems to be dominating the watercooler talk these days, I don’t see this getting any better anytime soon. Dividend shares might be the only answer – there’s not many other options that offer inflation-beating income returns these days, after all.
Saying that here are three ASX dividend shares that I think offer generous yields in today’s low-rate world.
Telstra Corporation Ltd (ASX: TLS)
The Telstra share price has had a pretty nice ride over 2019 so far – climbing from $2.77 back in January to today’s share price of $3.70 (at the time of writing). That’s a 33.6% year-to-date return (not including dividends).
Speaking of dividends, TLS is offering a starting yield of 4.32% (or 6.17% grossed-up) today if you include Telstra’s regular 10 cents per share dividend and the 6 cents it’s paid in special dividends this year. As Telstra has a fairly defensive earnings base (outside the nbn), I think this company is a potential buy at these levels for dividend income. As an added bonus, Telstra’s new 5G network might provide some additional upside in the coming years as well.
Australia and New Zealand Banking Group (ASX: ANZ)
ANZ has had a pretty dour few weeks, which have resulted in the ANZ share price now trading at its lowest level in three years. Sentiment surrounding the woes of its banking stablemate Westpac Banking Corp (ASX: WBC) seem to be drawing out the pain for ANZ shareholders, as has the Reserve Bank of New Zealand’s new capital requirements.
Still, I think this may be a great chance to buy ANZ shares and lock in a generous 6.51% dividend yield, which grosses-up to 8.47% when you include ANZ’s new 70% franking.
Coles Group Ltd (ASX: COL)
Coles is the newest ASX blue-chip on the block but has already crafted a reputation as a ‘must-own’ dividend share due to its target payout ratio of 80-90%. I also like Coles due to its recession-resistant earnings base and its Smarter Selling cost-cutting plan, which should allow some upward mobility for its dividend over the next few years. I estimate Coles will provide a forward grossed-up dividend yield of around 5%.
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Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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.