With interest rates continuing to slide, the yields on offer with traditional interest-bearing assets are at lower than imaginable levels now.
The good news is that the Australian share market is home to a good number of shares offering significantly better yields.
Two ASX dividend shares that offer above average yields are listed below:
Coles Group Ltd (ASX: COL)
This leading supermarket operator has been one of only a handful of companies that have been able to grow their dividends in 2020. This was driven by its very strong performance in FY 2020 following favourable changes to consumer behaviour during the pandemic. Coles reported a 6.9% increase in sales to $37.4 billion and a 7.1% lift in net profit after tax to $951 million. This positive form has continued into FY 2021, with Coles reporting very strong sales growth during the first quarter.
This has left many brokers expecting another strong result for the current financial year. One of those is Goldman Sachs. It believes Coles is well-positioned to increase its fully franked dividend to 64 cents per share in FY 2021. Based on the current Coles share price, this equates to a 3.6% dividend yield.
Rural Funds Group (ASX: RFF)
Another company that looks set to increase its dividend in FY 2021 is Rural Funds. It is an agriculture-focused property company that owns a portfolio of properties across five agricultural sectors. These properties are leased on ultra-long-term agreements to some of the biggest operators in the industry. At the last count, Rural Funds’ weighted average lease expiry (WALE) stood at a very lengthy 10.9 years.
It is because of this long WALE, that management can accurately predict its long term cash flows. This also means that it is able to set itself an achievable target of growing its distribution by an average of 4% per annum over the long term. This year the company intends to do exactly that and has provided guidance for an 11.28 cents per share distribution. Based on the current Rural Funds share price, this equates to a 4.5% yield.