If you’re looking for a way to beat low interest rates, then the ASX dividend shares listed below could be worth considering.
I believe both dividend shares could be great options for income investors due to their generous yields and strong businesses. Here’s why I would buy them:
BHP Group Ltd (ASX: BHP)
If you don’t have exposure to the resources sector, then you might want to get it with an investment in BHP. I think BHP is the best option in the sector due to its diverse, world class, and low cost operations. The mining giant also has a number of growth opportunities, particularly in oil, that I believe could create value for shareholders in the coming years.
In the meantime, BHP looks well-positioned to deliver very strong free cash flows again in FY 2021 thanks to favourable iron ore and copper prices. The good news is that given the strength of its balance sheet, I expect the majority of its cash flow to be returned to shareholders. Based on the latest BHP share price, I estimate that it offers investors a fully franked forward ~4.5% yield.
Telstra Corporation Ltd (ASX: TLS)
Another dividend share to consider buying is this beaten down telco giant. While the sizeable decline in the Telstra share price this year is disappointing for shareholders, I think it is a buying opportunity for non-shareholders. Especially if the company shifts its dividend policy to a free cash flow-based one and maintains its dividend.
In addition to this, after several years of profit declines, I believe a return to growth is on the horizon in the next couple of years. This is due to its T22 strategy, the easing NBN headwinds, and 5G internet. I expect the latter to be a big boost to mobile revenues once there is an iPhone that supports it. At present I still expect the company to pay a 16 cents per share dividend in FY 2021. Based on this and the current Telstra share price, it offers investors a fully franked 5.6% dividend yield.