Unfortunately for income investors, interest rates are currently at ultra-low levels and look unlikely to improve for some time to come.
The good news is that there are still plenty of ASX dividend shares that offer generous yields.
But which dividend shares should you buy? Here are two blue chip ASX dividend shares I would buy:
BHP Group Ltd (ASX: BHP)
If you're wanting to invest in the resources sector, then you might as well go for what is arguably the highest quality miner in the world – BHP. The Big Australian has a collection of world class, low cost assets which are generating significant free cash flows. This is particularly the case at the moment thanks to high iron ore and copper prices. Positively, the mining giant also has plenty of growth opportunities which could generate strong returns in the coming years.
This year I believe BHP is well-placed to deliver another strong full year result and, thanks to the strength of its balance sheet, pay more generous dividends to shareholders. Based on the current BHP share price, I estimate a fully franked 6.5% dividend yield.
Telstra Corporation Ltd (ASX: TLS)
Another blue chip ASX dividend share to buy is Telstra. Last week the telco giant dropped to a multi-year low of $2.72. I believe this has left the company's shares trading at an incredibly attractive level for income investors. Especially given its recent annual general meeting. At the event, the Telstra board revealed that it would be willing to amend its dividend policy to maintain its 16 cents per share fully franked dividend. The board will do this if they believe this dividend is sustainable over the medium term.
I'm confident this will be possible based on the early success of its T22 strategy, the arrival of 5G internet, and the easing NBN headwind. In light of this and based on the current Telstra share price, I expect Telstra's shares to provide a yield of 5.9% in FY 2021.
