According to the latest ASX 30 Day Interbank Cash Rate Futures, the market is pricing in a 73% probability of a rate cut to zero by the Reserve Bank next month.
While I’m not sure the central bank will take rates to zero, I do suspect a cut from 0.25% to 0.1% could be coming. If this happens, it is likely to further pressure on the interest rates offered with term deposits and savings accounts.
In light of this, I think income investors would be better sticking with dividend shares for the foreseeable future. But which dividend shares? Two I would buy are:
Bravura Solutions Ltd (ASX: BVS)
The first ASX dividend share that I would buy is Bravura Solutions. It is a leading provider of software products and services to the wealth management and funds administration industries. The key product in its portfolio for me is the Sonata wealth management platform. This has been underpinning its growth over the last few years and looks well-placed to continue doing so thanks to its quality and sizeable addressable market.
Bravura also has a number of other quality products supporting its growth. This includes the Rufus transfer agency solution, the Midwinter financial planning solution, and the recently acquired Delta Financial Systems. All in all, I believe this portfolio of products has put Bravura in a great position to grow its dividend at a strong rate over the 2020s. For now, I estimate that it will pay an 11.5 cents per share dividend in FY 2021. Based on the current Bravura share price, this equates to a 3.45% dividend yield.
National Storage REIT (ASX: NSR)
Another ASX dividend share that I think would be a great option is National Storage. It is one of Australasia’s largest self-storage providers. From its 190+ centres across Australia and New Zealand, National Storage tailors self-storage solutions to residential and commercial customers.
It has been growing at a solid rate over the last decade thanks to a combination of organic and inorganic growth. While trading conditions are tough at present because of the pandemic, I believe its exposure to ecommerce and a potential rebound in the housing market in 2021 will underpin further growth over the medium term. In the meantime, based on the current National Storage share price, I estimate that it offers investors a forward 4.2% 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 Bravura Solutions Ltd. 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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