If you’re looking for a source of income in this low interest rate environment, then the dividend shares listed below could be good options for you.
Here’s why I think these three ASX dividend shares are in the buy zone right now:
Commonwealth Bank of Australia (ASX: CBA)
While it seems inevitable that the tough trading conditions facing the banks right now will impact their profits and lead to sizeable dividend cuts, I believe this has been priced into their shares now. In light of this, I think now could be a good time to take advantage of a sharp pull back in the Commonwealth Bank share price over the last few months. Especially given how its shares provide a very generous dividend yield at current levels. Even after factoring in a potential dividend cut to $3.70 per share in FY 2021, I estimate that its shares offer a forward fully franked yield of ~6.3%.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
I think the coronavirus crisis highlights why having a diversified portfolio is an important part of investing. For this reason, I’m a big fan of the Vanguard Australian Shares High Yield ETF for income investors. This is because this exchange traded fund gives investors exposure to a diverse group of the highest paying blue chip shares on the ASX through a single investment. This includes mining giants, telco giant Telstra Corporation Ltd (ASX: TLS), and the big four banks. I estimate that its units provides a forward ~5% dividend yield at present.
Wesfarmers Ltd (ASX: WES)
A final dividend share to consider buying is Wesfarmers. I think it is a great option for investors due to the quality of its portfolio, their solid long-term growth outlook, and management’s track record of making earnings accretive acquisitions. Another positive is that Wesfarmers appears well-placed in the short term to deliver solid growth despite the coronavirus pandemic. This is due to the Bunnings business benefiting from increasing demand during the crisis. Given that it accounts for almost two-thirds of its earnings, I’m expecting solid underlying earnings and dividend growth from Wesfarmers in FY 2020. Based on this, I estimate that its shares offer a forward fully franked ~4% dividend yield.
These 3 stocks could be the next big movers in 2020
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In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.
*Returns as of 6/8/2020
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 owns shares of Wesfarmers 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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