As I mentioned here earlier, the interest rates on offer with term deposits have fallen to such low levels, you would have to invest millions into them to earn a sufficient income.
In light of this, the share market looks set to remain the place to earn a passive income for the foreseeable future.
But which shares should you buy? Here are two ASX dividend shares that are rated as buys:
Australia and New Zealand Banking GrpLtd (ASX: ANZ)
While trading conditions in the banking sector are likely to remain relatively tough in the near term, they are certainly improving now the worst of the pandemic appears to be behind us. In addition to this, the relaxing of responsible lending rules and the improving housing market look set to give the banks a boost in 2021.
Another positive is that APRA has just announced that it will be removing its dividend restrictions on the banks. This means they will be free to pay out however much of their profits that they see fit in 2021.
It was because of this that Morgans reiterated its add rating and lifted its price target on the company's shares to $26.00 last week. Morgans is forecasting a $1.27 per share dividend in FY 2021 and a $1.50 per share dividend in FY 2022. Based on the current ANZ share price, this represents 5.4% and 6.4% dividend yields, respectively.
Coles Group Ltd (ASX: COL)
This leading supermarket operator has been growing at a solid rate in recent years thanks to a combination of same store sales growth, store expansion, and its defensive qualities. The latter has been particularly helpful during the pandemic, with Coles reporting strong sales growth despite the economic downturn.
Pleasingly, this strong form has continued in FY 2021 even as COVID headwinds ease. This appears to have put Coles in a position to deliver a strong full year result next year.
Analysts at Citi appear confident this will be the case. The broker recently retained its buy rating and lifted the price target on the Coles share price to $21.20. It is also forecasting a 63.5 cents per share fully franked dividend this year. This represents a fully franked 3.5% dividend yield.
