2 ASX dividend shares to beat a 2020 RBA rate cut

Here's why I would buy ASX dividend shares like Sydney Airport Holdings Pty Ltd (ASX: SYD) to beat a 2020 RBA rate cut.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Yesterday, we got some unfortunate news. The national unemployment rate has risen from 5.1% to 5.3%. It's no secret that the Australian economy has had some headwinds recently.

Between bushfires, the coronavirus and an already sluggish economy, the Reserve Bank of Australia (RBA) looks set to consider yet more interest rate cuts this year. And the employment statistics released yesterday just made that a whole lot more likely.

Another rate cut in 2020 would mean even lower returns from bank accounts, term deposits and other forms of interest-bearing assets. That's why looking at ASX dividend-paying shares today could be a good way to plan ahead.

So, here are two ASX dividend shares that I think would make great hedges against another RBA interest rate cut.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

This is one of those rare companies whose name tells you exactly what it is. Sydney Airport owns and operates the only commercial airport in Sydney (at least until 2024) and thus, has a virtual monopoly in its market.

This enables the company to charge almost what it likes on passenger entries, aircraft landing and (infamously) parking. This isn't such good news for frequent travellers, but it is good news for Sydney Airport's shareholders.

The company has long paid a substantial dividend, and today investors can get a piece of the action with a 4.64% yield. Considering the relatively safe earnings base of Sydney Airport, I think the risk/reward balance for this dividend is worth a buy for income today.

WAM Research Limited (ASX: WAX)

WAM Research is an income-focused Listed Investment Company (LIC) that operates mostly in the mid-cap space of ASX shares. By buying what its management perceives to be undervalued growth companies and selling them once they appreciate, WAM Research is able to stockpile a profit reserve which it can then pay out to its shareholders as fully franked dividends. The current profit reserve stands at 30.1 cents per share – which is enough to cover around three years' worth of dividend payments.

Today, WAM Research pays an annualised dividend of 9.8 cents per share, which translates to a whopping 6.36% yield (or 9.09% grossed-up with franking). For such a market-leading yield, I think it's hard to pass up this LIC for dividend income today – although it is worth noting that WAX shares trade at a 27% premium to the underlying Net Tangible Asset value at the current time.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings 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.

More on ⏸️ Dividend Shares

falling healthcare asx share price Mesoblast capital raising
⏸️ Dividend Shares

Sonic Healthcare (ASX:SHL) dividend rises 7%, share price falls after FY21 results

Triple digit profit growth and a solid dividend was not enough to impress investors on Monday.

Read more »

A smiling woman with a handful of $100 notes, indicating strong dividend payments
⏸️ Dividend Shares

The Adairs (ASX:ADH) dividend more than doubled in FY21

A record financial result will see a generous dividend paid out to Adairs shareholders.

Read more »

A businessman on a road raises his arms as dollar notes rain down on him.
⏸️ Dividend Shares

The Newcrest (ASX:NCM) dividend boosted 129%

Newcrest marks its sixth successive year of increasing dividend payments to shareholders

Read more »

Happy couple laughing while shopping in supermarket
52-Week Highs

August has been a great month so far for the Woolworths (ASX:WOW) share price

We take a look at how shares in the supermarket giant have been performing ahead of the company's full-year results

Read more »

wine glass full of coins
⏸️ Dividend Shares

The Treasury Wines (ASX:TWE) dividend bumped up by 60%

Here's how Treasury Wines dividends for FY21 have stacked up.

Read more »

Young boy cries and covers eyes with torn money on table
⏸️ Dividend Shares

The Origin (ASX:ORG) dividend has dropped 20%

What's happened to Origin's dividends?

Read more »

two people hold a sheet above their head while making a bed in a room featuring homewares.
Retail Shares

How did the Adairs (ASX:ADH) share price respond last earnings season?

The homewares retailer will be looking for another year like last year when it releases its FY21 earnings tomorrow.

Read more »

Two men excited to win online bet
Share Market News

Why the Tabcorp (ASX:TAH) dividend was boosted by 32%

The strong performance of Tabcorp's business will see a combined FY21 dividend of 14.5 cents.

Read more »