At present the base rate on an Australia and New Zealand Banking GrpLtd (ASX: ANZ) term deposit is just a paltry 0.75% per annum
With a rate as low as that, it is almost impossible for investors to generate a sufficient income to live from.
For example, even if you were to invest $2 million into these term deposits, you'd only receive $15,000 back at the end of the term.
Fortunately, better yields can be found on the Australian share market.
Two ASX dividend shares that I would buy are listed below. Here's why I like them:
BWP Trust (ASX: BWP)
I think BWP Trust would be a great alternative to a term deposit. It is the largest owner of Bunnings Warehouse sites in Australia with a portfolio of 68 stores leased to the hardware giant. I think Bunnings is a quality tenant to have, especially given how it has thrived during the pandemic. Combined with government stimulus, which is supporting the home improvement market, I believe there is a very low risk of rental defaults or stores closures in the near term. This should mean BWP is in a position to continue growing its income and distribution at a solid rate for the foreseeable future. Based on the current BWP share price, I estimate that it offers a generous 4.7% FY 2021 distribution yield.
Transurban Group (ASX: TCL)
Another ASX dividend share to consider buying instead of a term deposit is Transurban. While it has had a tough few months because of the pandemic, with restrictions now easing, traffic volumes and toll revenues have been recovering. I'm not overly confident the company will pay a final distribution in FY 2020, but I expect its distributions to return to attractive levels next year. I now expect the company to pay shareholders a 44 cents per unit distribution next year. Based on the current Transurban share price, this equates to a 3.2% distribution yield.
