Although the Reserve Bank didn’t cut rates to zero today, it doesn’t make it any easier for income investors to generate a liveable income from term deposits.
Unfortunately, I suspect that it will be some time until rates are back to “normal” levels again. Which I believe makes it even more important to find good dividend shares to invest your hard-earned money into.
But what makes a good dividend share? When looking for dividend shares, I think investors should look for robust business models, positive growth outlooks, and strong balance sheets.
Two that tick a lot of boxes for me are listed below. Here’s why I think they are dividend shares to buy:
BWP Trust (ASX: BWP)
The first dividend share that I’m a big fan of is BWP Trust. It is the largest owner of Bunnings properties in Australia. This morning the company released its full year results and revealed a 1% increase in profit before gains on investment properties to $117.1 million. Incredibly, at a time when retail properties are being impaired, BWP Trust recognised a $93.6 million increase in the gains in fair value of its investment properties. Management advised that this reflects the continuing strong market support for Bunnings Warehouse properties from an investment and risk perspective. Looking ahead, BWP Trust expects to pay a distribution in the region of 18.29 cents per unit in FY 2021. This works out to be an attractive 4.6% yield.
Wesfarmers Ltd (ASX: WES)
Another dividend share that ticks a lot of boxes for me is Wesfarmers. It has been a positive performer during the pandemic thanks largely to the aforementioned Bunnings brand. The good news is that with the government supporting the home improvements market with additional stimulus, I believe it is well-placed to continue its strong form in FY 2021 and underpin solid earnings and dividend growth for Wesfarmers. Another positive which I think is worth pointing out, is Wesfarmers’ strong balance sheet. This provides it with the flexibility to undertake earnings accretive acquisitions that could give its growth a boost in the coming years. Based on the current Wesfarmers share price, I estimate that it offers investors a fully franked forward 3.3% dividend yield.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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