If you're in search of dividends, then the big four banks are traditionally the go to shares for many income investors.
However, with APRA putting pressure on the banks to reduce their dividends or even suspend them during the coronavirus pandemic, I can understand why some investors are reluctant to buy Commonwealth Bank of Australia (ASX: CBA) and other bank shares.
So which dividend shares should you buy instead of the banks?
Dicker Data Ltd (ASX: DDR)
The first dividend share to consider is Dicker Data. It is a wholesale distributor of computer hardware and software products throughout Australia. From its wide range of vendors, the company services over 5,000 resellers who in turn service clients ranging from SMEs to large corporations. Dicker Data has been a very strong performer over the last 12 months and appears well-positioned to continue this form despite the coronavirus pandemic. I estimate that its shares offer a forward fully franked 4.7% dividend yield.
Wesfarmers Ltd (ASX: WES)
I think Wesfarmers would be a good alternative to the banks. It looks set to be a positive performer in FY 2020 despite the coronavirus pandemic. This is thanks to the strong demand that its key Bunnings business is experiencing currently. Given that Bunnings contributes ~61% of its total earnings, I expect a strong finish to the financial year. Outside this, I like the company due to the quality and diversity of its portfolio and its positive long term growth prospects. Its shares currently offer an estimated forward fully franked 4% dividend yield.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
A final option for income investors to consider buying is the Vanguard Australian Shares High Yield ETF. I like this as an alternative to owning the banks directly as its still provides you with exposure to them, but offers you sufficient diversity to protect you if they don't pay dividends. The exchange traded fund invests in a large number of high yield dividend shares such as telcos, banks, and miners. I estimate that it provides a forward ~80% franked 5.4% dividend yield.
