Next week the Reserve Bank will meet again to discuss the cash rate.
Although I feel a cut to zero is a possibility given recent economic data and projections, I feel it is unlikely at this meeting.
This is a small win for income investors who look likely to have to battle with low interest rates for possibly a few more years.
But don’t worry if you’re an income investor, because the ASX dividend shares listed below can help you beat low rates:
Dicker Data Ltd (ASX: DDR)
Dicker Data is a bit of an unsung hero of the Australian share market. The wholesale distributor of computer hardware and software has quietly been growing its earnings and dividends at a consistently solid rate for many years. This has been driven by its increasing number of vendor relationships, strong market position, and robust demand for information technology products.
As a result, its shares have rewarded shareholders with some very strong returns over the last five years. Since this time in 2015, Dicker Data shares have generated an average total return of 32.2% per annum. While I suspect the returns may moderate over the next five years, I’m confident that it will still be a market beater. Especially given its generous dividend yield. In FY 2020 Dicker Data intends to lift its fully franked dividend by 31% to 35.5 cents per share. Based on the current Dicker Data share price, this represents an attractive 4.7% dividend yield.
Telstra Corporation Ltd (ASX: TLS)
The last five years have been very different for Telstra and its shareholders. The disruption to its fixed line business by the NBN has led to its shares losing shareholders an average of 6.7% per annum since this time in 2015. The good news is that I believe the worst is now over for the telco giant and expect the next five years to be materially better.
This is thanks to its T22 strategy, rational competition, and the easing of the NBN headwind. In respect to the latter, peak pain from the rollout is on the horizon and should make a return to growth possible in the not so distant future. For now, I believe its 16 cents per share dividend is sustainable from its current cash flows. Based on the latest Telstra share price, this means it offers investors a fully franked 4.7% dividend yield.
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Returns As of 6th October 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 Dicker Data Limited and Telstra 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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