Finding ASX shares with dividend yields over 7% is a lot harder than it used to be. Gone are the days when at least 2 of the big four ASX banks had a 7% yield on offer. Ditto with other ASX blue chips like Woolworths Group Ltd (ASX: WOW) or Wesfarmers Ltd (ASX: WES).
Even before the coronavirus pandemic hit, record low interest rates saw ASX dividend shares bid to the sky as investors hunted for yield. It’s a big reason why (in my opinion), ‘safe’ dividend shares like Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD) both rose by roughly 50% in value between late 2018 and early 2020.
But the game has changed in 2020. The pandemic has crippled the power of many ASX companies to generate profits at the same rates they used to. And dividends are paid out of profits.
So here are 2 ASX shares that still offer investors a grossed-up yield of more than 7% in 2020.
2 ASX dividend shares with high yields
1) Telstra Corporation Ltd (ASX: TLS)
Telstra shares have been on the slide ever since the company released its full-year earnings last week. Investors apparently weren’t too impressed with the 9.7% drop in underlying earnings the company reported for FY2020.
However, one aspect of the announcement was well-received: the continuation of Telstra’s 16 cents per share annual dividend. And because Telstra shares have fallen around 10% over the past week, that dividend is looking a whole lot juicer today.
On current prices, it’s offering investors a trailing yield of 5.26%, or 7.51% grossed-up with full franking. That’s not a bad looking deal for dividend income in my view. I’m also excited bout Tesltra’s upcoming 5G rollout, which could give the company a new source of earnings (and fund higher dividends) in the years ahead.
WAM Research Ltd (ASX: WAX)
WAM Research is a listed investment company (LIC) run by the venerable Wilson Asset Management. It primarily invests in mid-cap ASX companies with growth characteristics or that it finds undervalued. Some of its current holdings include Adairs Ltd (ASX: ADH) and Breville Group Ltd (ASX: BRG). It then uses the gains from this strategy to fill a ‘profit reserve’, from which it pays dividends.
WAM Research’s last dividend came in at 4.9 cents per share, which if annualised gives this company a dividend yield of 7.1%, or 10.14% grossed-up with full franking. Seeing as WAM research still has 27.7 cents per share left in its profit reserve, I would say this dividend is well-covered for at least a couple of years. As such, I think it’s a top choice today for any income investor looking for reliable ASX dividend shares.