It certainly is getting very hard to earn a passive income from traditional interest-bearing financial products like savings accounts and term deposits.
Fortunately, the Australian share market still has plenty of dividend shares offering yields that could solve your income needs. Two to look closely at are listed below:
BWP Trust (ASX: BWP)
The first dividend share to look at is commercial property company BWP Trust. It is the largest owner of Bunnings Warehouse sites across Australia.
Given the quality of the Bunnings business and its strong performance during the pandemic, BWP has been a solid performer over the last 12 months. In fact, it even saw the value of its properties increase at the height of the crisis. This led to the company reporting an impressive 24.4% increase in full year profit to $210.6 million in FY 2020.
This strong form also allowed the BWP board to increase its distribution to 18.29 cents per unit. Based on the current BWP share price, this represents a trailing 4.3% yield for investors. Management advised that a similar dividend is expected in FY 2021.
The banking sector didn't fare anywhere near as well as BWP in FY 2020. A spike in loan deferrals and billions of dollars worth of provisions weighed heavily on investor sentiment and sent bank shares down to multi-year lows. It also forced the banks to cut or suspend their dividends, much to the dismay of shareholders.
The good news is that the worst now appears to be over and the banks have come out of the crisis in a much better shape than expected. And while their shares have rallied hard because of this, it doesn't appear to be too late to invest for income thanks to APRA's decision to scrap its dividend restrictions.
Last week analysts at Morgan Stanley put an outperform rating and $22.50 price target on Westpac's shares. The broker is also forecasting an 86 cents per share dividend in FY 2021 and then a $1.08 per share dividend in FY 2022. This represents 4% and 5% dividend yields, respectively, over the next two years.