Given the bleak outlook for interest rates, I continue to believe that ASX dividend shares are the best way for investors to generate an income in the current environment.
Luckily, there are plenty of quality options for investors to choose from right now.
Two that I would buy today are listed below. Here's why I like them:
Dicker Data Ltd (ASX: DDR)
The first ASX dividend share to consider buying is Dicker Data. It is a leading distributor of computer hardware and software across the ANZ region that has been growing both its earnings and dividend at a quick rate over the last few years. Pleasingly, this has continued in 2020 despite the pandemic. In fact, just yesterday Dicker Data released its third quarter update and revealed year to date profit before tax growth of 28.3% to $60.8 million.
I believe it can continue its growth in FY 2021 and beyond thanks to its strong market position, growing vendor agreements, positive industry tailwinds, and new distribution centre. Once the latter is constructed it will give Dicker Data significant room to expand its operations and boost its revenues. For now, the company appears well-placed to increase its dividend to 35.5 cents per share this year. Based on the latest Dicker Data share price, this equates to a fully franked 3.9% dividend yield.
Rural Funds Group (ASX: RFF)
Another ASX dividend share I would buy is Rural Funds. It is an agriculture-focused property group that owns a number of properties across five agricultural sectors. These properties are of a very high quality and are leased on long term agreements to some of the biggest operators in the industry such as wine giant Treasury Wine Estates Ltd (ASX: TWE).
These tenancy agreements are a key reason why I think Rural Funds is a top option for investors. At the end of FY 2020, Rural Funds had a weighted average lease expiry (WALE) of 10.9 years. Given that these leases have rental increases built into them, the company has great visibility on its future earnings. In light of this, I believe it is well-positioned to continue growing its distribution by its 4% per annum target each year throughout the 2020s. For now, a distribution of 11.28 cents per share is expected in FY 2021. Based on the current Rural Funds share price, this works out to be a 4.75% yield.
