In the current low interest rate environment, income investors will be lucky to receive an interest rate of 1% from term deposits.
Fortunately, the Australian share market is home to plenty of shares that offer dividend yields which are notably better than this.
For example, the two ASX dividend shares listed below provide yields of over 3.5% at present. Here's what you need to know about them:
BWP Trust (ASX: BWP)
BWP is a real estate investment trust (REIT) that invests in and manages commercial assets across Australia. The majority of its assets are leased to home improvement giant, Bunnings Warehouse.
While 2020 has been difficult for many property companies because of the pandemic, BWP has come out of the crisis largely unscathed. This is because the Bunnings business has been a very strong performer this year and flourished during the pandemic. So much so, BWP Trust recognised a $93.6 million increase in the gains in fair value of its investment properties in FY 2020.
This allowed BWP to increase its full year distribution to 18.29 cents per unit. Based on the current BWP share price, this represents a 4.3% yield.
Coles Group Ltd (ASX: COL)
This supermarket giant has been a very positive performer in 2020 thanks to its defensive qualities and favourable changes in consumer behaviour during the pandemic. In FY 2020 the company delivered a 6.9% increase in sales to $37.4 billion and a 7.1% lift in net profit after tax to $951 million. The good news is that this strong form has continued in FY 2021, with Coles recently reporting strong first quarter sales growth.
One broker that believes this has put Coles in a position to increase its dividend again this year is Goldman Sachs. In response to its first quarter update, the broker has increased its earnings and dividend forecasts for the year. It now expects the company to pay a fully franked 64 cents per share dividend in FY 2021. Based on the current Coles share price, this equates to a 3.6% dividend yield.
