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3 high yield ASX dividend shares that smash low interest rates

Later today the Reserve Bank will meet to discuss the cash rate.

Despite the central bank making an emergency cut to 0.25% last month, the market believes rates could still go lower. According to the latest cash rate futures, the market is pricing in a 57% probability of a cut to zero today.

Whilst I’m not overly convinced the Reserve Bank will cut again today, I am convinced that it will be a long time before rates return to normal levels again.

In light of this, I think that those in search of a passive income ought to look to the share market instead of term deposits.

But which dividend shares should you buy? Here are three top dividend options to consider this week:

Commonwealth Bank of Australia (ASX: CBA)

My favourite option in the big four banks is Commonwealth Bank. Although it may not be the cheapest big four bank or have the biggest yield, I think it is easily the highest quality bank Australia has to offer. And in times like these, I feel it makes sense to stick with quality. Trading conditions are admittedly difficult in the banking sector, but I believe this has more than been priced into its shares. I expect the bank to cut its dividend to ~$3.80 per share in FY 2021, which equates to a forward fully franked 6.1% dividend yield.

Jumbo Interactive Ltd (ASX: JIN)

Jumbo is a leading online lottery ticket seller. Due to a sharp pullback in its share price over the last few months, it has become an attractive option for income investors. Investors have been selling Jumbo’s shares due to its declining earnings due to its decision to invest in growth opportunities. I think this is shortsighted by investors and believe Jumbo is positioning itself for a return to strong growth in FY 2021 and beyond. Especially given how the coronavirus is pushing player to seek online options after the closure of many physical vendors. I estimate that its shares offer a forward fully franked 4% dividend yield.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

A final option for income investors to consider buying to beat low interest rates is the Vanguard Australian Shares High Yield ETF. This exchange traded fund provides investors with exposure to a large number of dividend paying shares. The majority of which are the highest yielding shares on the ASX. This includes the big four banks, mining giants, and telcos. At present I estimate that it provides a forward ~80% franked 5.4% dividend yield.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive 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.