With interest rates unlikely to go higher anytime soon, ASX dividend shares look set to remain the best place to earn a passive income.
But which ASX dividend shares should you buy? Here are two that are highly rated:
BHP Group Ltd (ASX: BHP)
This mining giant could be a good option for income investors that don't mind investing in the resources sector. On Tuesday the Big Australian released its half year results and reported a 15% increase in revenue to US$25.64 billion and a 21% jump in underlying EBITDA to US$14.7 billion.
And thanks largely to sky high copper and iron ore prices, BHP generated significant free cash flow.
Positively, the company elected to return almost all of its US$5.2 billion free cash flow to shareholders through dividends. BHP declared a fully franked interim dividend of US$1.01 per share (~A$1.30 per share), which was up 55% on the prior corresponding period.
Analysts at Goldman Sachs expect similar in the second half. Based on the current BHP share price, they estimate that it offers investors a 5.9% full year dividend yield. The broker currently has a buy rating and $47.50 price target on its shares.
Transurban Group (ASX: TCL)
Another ASX dividend share to consider buying is Transurban. This leading toll road operator is the owner of a collection of key roads in Australia and North America.
While times have been hard over the last 12 months, traffic levels are improving and are likely to continue doing so as vaccines are rolled out.
Looking ahead, due to the quality of its roads, the time savings they offer, and their strong pricing power, Transurban appears well-placed to increase its distribution at a solid rate over the next decade, just like it has in the past.
One broker that is positive on the company is Ord Minnett. It currently has a buy rating and $16.50 price target on its shares. The broker is forecasting a 42.8 cents per share distribution in FY 2021 and then a 56.9 cents per share distribution in FY 2022.
Based on the latest Transurban share price, this will mean forward yields of 3.2% and 4.25%, respectively.
