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Beat low rates with these quality ASX dividend shares

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This afternoon the Reserve Bank of Australia opted to keep the cash rate on hold at 0.1%. While this was largely expected to be the case, cash rate futures were hinting that a cut to zero could be coming.

Unfortunately, the central bank looks unlikely to be raising rates any time soon. Governor Lowe stated: “…wage and price pressures are subdued and are expected to remain so for some years.”

And while there may be a slight uptick in inflation in the near term, this is only expected to be temporary.

Mr Lowe explained: “It will take some time to reduce this spare capacity and for the labour market to be tight enough to generate wage increases that are consistent with achieving the inflation target. In the short term, CPI inflation is expected to rise temporarily because of the reversal of some COVID-19-related price reductions. Looking through this, underlying inflation is expected to remain below 2 per cent over the next few years.”

In light of this, ASX dividend shares look set to be the best place to earn a passive income for the foreseeable future.

But which ASX shares should you buy? Two to consider are listed below:

Coles Group Ltd (ASX: COL)

This supermarket operator could be a top option for income investors. This is due to its strong market position, defensive qualities, positive long term growth outlook, and attractive valuation.

Goldman Sachs thinks its shares are good value. Its analysts have a buy rating and $20.70 price target on its shares currently. 

Goldman is also forecasting a 62 cents per share dividend in FY 2021. Based on the current Coles share price, this represents a fully franked 3.9% yield.

Rural Funds Group (ASX: RFF)

Rural Funds is another ASX dividend share to consider. It is an Australian agricultural property company with a collection of high quality assets.

These are leased to some of the biggest players in the industry on long term agreements. And thanks to fixed rental increases, the company is positioned to deliver on its target of 4% growth in its distribution each year.

In FY 2021, Rural Funds plans to pay a distribution of 11.28 cents per share. After which, it has provided guidance for an FY 2022 distribution of 11.73 cents per share.

Based on the current Rural Funds share price, this will mean yields of 4.8% and 5%, respectively, over the next couple of years.

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Returns As of 15th February 2021

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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