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Forget CBA term deposits and buy these ASX dividend shares

The big four banks have been cutting the interest rates on their term deposits this year.

At present, a 12-month term deposit from Commonwealth Bank of Australia (ASX: CBA) for balances above $50,000 offers an interest rate of just 1.1%.

This is lower than the inflation rate, which effectively means that you’re losing money in real terms.

In light of this, I think investors ought to look to the share market for a source of income. Especially after the coronavirus outbreak dragged shares down to levels that mean they offer very generous dividend yields.

Here are two ASX dividend shares that I think would be worth considering once the market volatility eases:

Accent Group Ltd (ASX: AX1)

I think Accent Group could be a good option for income investors after its sharp share price decline over the last three weeks. Although trading conditions in the retail industry have been tough, this hasn’t stopped this footwear-focused retail group from delivering solid profit and dividend growth. I’m confident there will be more of the same in FY 2020 thanks to the popularity of its Athlete’s Foot, HYPE DC, and Platypus stores with consumers. At present its shares offer a trailing fully franked 7.45% dividend yield.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

Another option for income investors to consider is the Vanguard Australian Shares High Yield ETF. As its name implies, this ETF invests in many of the highest yielding dividend shares on the local market. I like it because not only does it offer a generous dividend yield, it does this through a diverse group of shares ranging from miners such as BHP Group Ltd (ASX: BHP), the big four banks, and telco giant Telstra Corporation Ltd (ASX: TLS). At present I estimate that the Vanguard Australian Shares High Yield ETF offers a partially franked dividend yield of ~6.2%.

5 stocks under $5

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*Extreme Opportunities returns as of June 5th 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Accent Group. 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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