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Sick of term deposits? Try these ASX dividend shares

If you’re looking for dividends to help replace your dwindling term deposit income then ASX dividend shares could be the answer. 

You’ll be lucky to find any bank offering a term deposit interest rate that starts with a 2%. I’d much rather invest in one of these dividend shares rather than have a term deposit:

Arena REIT No 1 (ASX: ARF) 

As the name might suggest, Arena is a real estate investment trust (REIT), it owns a portfolio of social property. This is mostly childcare centres, but it also owns quite a few healthcare properties that are leased to Healius Ltd (ASX: HLS). 

The benefit of being a REIT is that it generates consistent monthly rental income and that leads to dependable operating profit. Arena REIT has a 100% occupancy rate with long-term rental leases, so most of its rental income is already locked-in for the next few years apart from market rental reviews and acquisitions. 

Arena REIT has managed to consistently grow its operating earnings each year over the past few years which has fuelled good growth of the distribution. 

In FY20 Arena REIT is growing its distribution by almost 6%, it currently has a distribution yield of 4.8%.  

InvoCare Limited (ASX: IVC)

InvoCare is the biggest funeral operator in Australia and New Zealand, it has a market share of around a third. Being the biggest gives it plenty of scale advantages compared to its competitors.

The company is working on renovating numerous locations so that they’re modern, bright and a celebration of someone’s life rather than being a morbid affair. After a thankfully subdued funeral market over the past year or two, conditions are returning to normal. InvoCare is well placed to benefit from this with rising volumes and the renovations should lead to higher prices per funeral.

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. This is a useful ultra-long-term trend for InvoCare to take advantage of. 

InvoCare has a grossed-up dividend yield of 3.8%. 

Foolish takeaway

Investors have been searching for yield due to Australia’s low interest rates. The above two share options are pretty defensive, but there are plenty of other shares with good yields to consider.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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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