With interest rates now at a fresh record low of 0.25%, the attraction of ASX dividend shares has rarely been more acute. Many investors are asking themselves why they’re settling for an interest rate under 2% from the bank when some ASX dividend shares are offering more than triple that in potential yields. After all, 2% will barely cover inflation as it is, you wouldn’t be too much worse having your cash under the mattress.
But 2020 has seen a lot of former dividend heavyweights deliver cuts in their shareholder payouts. These include the big four ASX banks, Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD).
So here are 2 ASX dividend shares that: 1) offer grossed-up dividend yields over 6%; and 2) are not likely (in my opinion) to cut said dividend going forward.
Origin Energy Limited (ASX: ORG)
Origin is a utility company that provides electricity and gas connections as well as owning several electrical generation assets. I like these kinds of companies as dividend plays, because energy is a very inelastic service (meaning its use doesn’t fluctuate too much, regardless of what else is happening in the economy). Origin shares haven’t been doing too well as of late. Friday’s closing price was $5.95, which is still well below the ~$8.70 highs we were seeing back in February.
Still, I think this is a safe-and-steady kind of investment that will give off some robust returns over the next few years, especially from dividend payments. On current prices, Origin shares are offering a trailing dividend yield of 5.04%, which grosses-up to 7.2% with full franking credits.
Metcash Ltd (ASX: MTS)
Metcash is the company behind the IGA chain of grocery stores in Australia, as well as the Mitre 10 and Home Timber & Hardware chains. The company also owns a small network of bottle shops, which include the Thirsty Camel and Bottle-O brands. Metcash is perennially the underdog in the grocery war, often overlooked for its larger rivals Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL).
But I think there is value still left in this underdog. Many people prefer shopping at the smaller, friendlier IGAs and the company has managed to hold on to a small but significant market share in the grocery industry overall. And hardware is also a fairly robust and defensive business to be in as well.
On current prices, Metcash shares are offering a trailing dividend yield of 4.45% – which grosses-up to 6.36% with full franking.
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Returns As of 6th October 2020
Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Transurban Group, and Woolworths 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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