As was widely expected, on Tuesday the Reserve Bank cut the cash rate to a record low of 0.1%.
Unfortunately, this is potentially going to make it even harder for income investors to generate sufficient returns from term deposits and other interest-bearing assets.
But don't worry, because the Australian share market is home to plenty of dividend shares.
Two companies that pay out a large amount of their earnings as dividends are listed below:
Bravura Solutions Ltd (ASX: BVS)
Bravura is a leading wealth management and transfer agency software solution provider. The key product in its portfolio (and biggest contributor to earnings) is the Sonata wealth management platform. This platform streamlines the administration of a full range of wealth management products – all within a single solution. In addition to this, the company has a number of other popular solutions with large addressable markets. This includes the Rufus transfer agency solution, the Garradin back office solution, and the Midwinter financial planning solution.
In FY 2020 Bravura posted a 22% increase in net profit after tax to $40.1 million. This allowed the Bravura board to declare a 5.5 cents per share unfranked final dividend, which brought its full year dividend to 11 cents per share. Based on the current Bravura share price, this equates to a trailing 3.7% yield.
Coles Group Ltd (ASX: COL)
This supermarket operator has been a strong performer in 2020 despite the pandemic thanks partly to its defensive qualities. In FY 2020 the company reported a 6.9% increase in sales to $37.4 billion and a 7.1% lift in net profit after tax to $951 million. Pleasingly, this strong form has continued in FY 2021, with Coles recently reporting very strong first quarter sales growth.
In light of this strong start to the year, analysts at Goldman Sachs increased their earnings and dividend forecasts for the year. In respect to the latter, the broker estimates that the company will pay a fully franked 64 cents per share dividend. Based on the current Coles share price, this equates to a 3.5% dividend yield.
