With interest rates unlikely to improve from their record lows any time soon, it's very fortunate that the Australian share market has dividend shares offering investors very generous yields.
Two ASX shares dividend shares with above-average yields are listed below. Here's what you need to know about them:
Fortescue Metals Group Limited (ASX: FMG)
The first dividend share with a generous yield is one of the world's leading iron ore producers, Fortescue.
Over the last few years the mining giant's shares have generated staggering returns for investors. This has been underpinned by its significant cost reductions, an increase in its grades, production growth, and favourable iron ore prices.
In respect to the latter, the spot iron ore price climbed to a whopping US$170.60 a tonne last week. This compares incredibly favourably to Fortescue's current C1 costs of US$12.74 per wet metric tonne.
Given the margins the company is enjoying and its strong balance sheet, it has been tipped to reward shareholders with bumper dividends in FY 2021.
Macquarie, for example, is forecasting a fully franked $2.61 per share dividend over the next 12 months. Based on the current Fortescue share price, this equates to a sizeable 10% dividend yield.
Rural Funds Group (ASX: RFF)
Another dividend share with a generous forward yield is Rural Funds. It is an agricultural property-focused real estate investment trust (REIT) which owns a diversified portfolio of high quality assets. These assets are leased to experienced agricultural operators such as wine giant Treasury Wine Estates Ltd (ASX: TWE) on very long leases.
At the end of FY 2020, the company owned 61 properties with a combined value of $1 billion and a weighted average lease expiry (WALE) of 10.9 years. From these leases, it was generating adjusted funds from operations (AFFO) of 11.7 cents per share.
Thanks to fixed rental increases, the company intends to grow its distribution by its 4% per annum target rate in FY 2021. This will mean an 11.28 cents per share distribution for shareholders. Based on the latest Rural Funds share price, this represents a 4.3% yield.
