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Replace your term deposit with these ASX dividend shares

The Reserve Bank of Australia interest rate is currently 0.75% and is expected to go lower. You may want to replace your term deposit with ASX dividend shares instead.

These ASX dividend shares could be up to the job:

APA Group (ASX: APA) 

APA Group is one of the biggest infrastructure businesses on the ASX. It has investments in a variety of energy assets including gas pipelines, storage and energy generation.

It has steadily invested in more assets as time has gone on. Indeed, APA is planning to invest $300 million to $400 million in ‘growth’ capital expenditure over the next two to three years.

Why is it such a good dividend share? It has increased its distribution each year since FY05 and is predicting a distribution of 50 cents per share, an increase of 6.4% on FY19.

The FY20 distribution forecast amounts to 4.4%.

InvoCare Limited (ASX: IVC) 

InvoCare is the largest funeral business in Australia and New Zealand. It might sound pretty morbid, but as the saying goes – there’s only two things certain in life, death and taxes. InvoCare receives an almost guaranteed level of revenue and profit each year with InvoCare having around a third of the funeral market.

Why could it be such a good dividend share? Well, it grew its dividend every year between 2005 and 2018. However, a sharp fall in the number of deaths and heavy investment by InvoCare saw a dividend reduction in 2019.

Death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050. Plus, InvoCare isn’t far off finished renovating all of its locations, plus it has made a number of acquisitions in regional areas.

I think the dividends could continue to grow over the ultra-long-term.

The starting grossed-up dividend yield of 3.9%.

Washington H. Soul Pattinson and Co Ltd (ASX: SOL) 

Soul Patts is an investment house that has been operating for over a century.

Why could it be such a good dividend share? Well, it’s already a great dividend share. It has increased its dividend every year since 2000. It funds that dividend entirely from the operating cashflow of dividends and interest less expenses, so the dividend is very sustainable whilst leaving some cash for re-investment into more opportunities.

In FY19 Soul Patts’ cash generation was up 18% and it recently announced it is now investing in agriculture and luxury retirement living.

I expect Soul Patts will increase the annual dividend by another 2 cents per share in FY20, meaning the forward grossed-up dividend yield is 3.75%.

Foolish takeaway

I think each of these shares are some of the most likely to be able to keep growing their dividends consecutively over the next decade, although I’d say Soul Patts has the best chance of continuing to grow dividends because of its diversified portfolio.

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Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended InvoCare 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.

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