At present the interest rates on offer with term deposits are at ultra low levels and struggling to keep up with inflation.
In light of this, I suspect many income investors will be looking for suitable alternatives.
But where can you turn? I think that ASX dividend shares could be the best way to replace your term deposit if you're after reliable source of income. Especially given the generous yields on offer with many dividend shares right now.
Three ASX dividend shares that I would buy are listed below. Here's why I like them:
Aventus Group (ASX: AVN)
The first ASX dividend share I would suggest investors look at is Aventus. Although retail property companies are having a very difficult time during the pandemic, I'm optimistic that Aventus will be less impacted than others. This is because it specialises in large format retail parks and has a total of 20 centres across Australia. Its tenancies have a high weighting towards everyday needs and host high quality retailers such as ALDI, Bunnings, Officeworks, and The Good Guys. I believe this leaves it better positioned than most to ride out the storm. As a result, I estimate that Aventus shares could provide investors with a dividend yield of over 6% for FY 2021.
Dicker Data Ltd (ASX: DDR)
Another dividend share to consider buying is Dicker Data. It is a wholesale distributor of computer hardware and software across the ANZ region. Dicker Data has been a strong performer in FY 2020 and reported stellar growth during its recently completed first half, The company reported half year revenue above $1 billion for the first time and a 30.4% lift in net profit before tax to $42 million. In light of this, the company is on course to increase its dividend by 31% to 35.5 cents per share this year. Based on the current Dicker Data share price, this represents a generous fully franked 4.8% dividend yield.
Telstra Corporation Ltd (ASX: TLS)
A final ASX dividend share to consider buying is this telco giant. I think Telstra is one of the best dividend shares to buy on the ASX right now due to its defensive qualities and positive medium term outlook. Those defensive qualities have been on display for all to see this year. For example, at the height of the pandemic, Telstra was able to reaffirm its guidance for FY 2020. Importantly, this includes its free cash flow guidance for FY 2020. As a result, it appears perfectly positioned to continue paying a 16 cents per share fully franked dividend this year. And looking further ahead, I believe this dividend is sustainable for the foreseeable future thanks to its cost cutting, productivity improvements, and price increases. Based on the current Telstra share price, this dividend equates to an attractive 4.8% yield.
