While the expectations for rate increases continues to improve, it is still likely to be some time until term deposits offer liveable yields.
But don't worry because there are plenty of quality dividend shares on the Australian share market that offer the potential for capital returns and generous yields.
Two such ASX dividend shares are listed below. Here's what you need to know:
Australia and New Zealand Banking Group Ltd (ASX: ANZ)
The first ASX dividend share that could be a buy is ANZ. This is due to its strong position in commercial banking and its attractive valuation. The former gives the bank some protection from the margin pressures being experienced in retail banking from aggressive competition for mortgages.
As for the latter, according to a note out of Bell Potter this week, its analysts estimate that ANZ's shares are trading at 12.5x earnings and 1.2x book value. Based on this, the broker sees scope for the bank's shares to rise strongly in 2022. In fact, it has just slapped a buy rating and $31.00 price target on its shares. This implies potential upside of 14.5% over the next 12 months.
In addition, the broker is forecasting fully franked dividends per share of 144 cents in FY 2022 and 151 cents in FY 2023. This implies yields of 5.3% and 5.6%, respectively, over the next two years.
Coles Group Ltd (ASX: COL)
Another ASX dividend share to look at is this supermarket giant. It has been a solid performer over the last few years and even during the pandemic.
Pleasingly, its sales growth has continued in FY 2022, with Coles reporting a 1.5% increase in total first quarter sales to $9,756 million. This growth was driven by its Supermarket and Liquor businesses, which offset weakness in the Express business due to lockdowns.
And while COVID costs are likely to weigh on its margins in the near term, this should only be temporary. After which, Coles looks well-placed to expand its margins as its focus on automation starts to pay dividends.
Speaking of dividends, the team at Citi is forecasting fully franked dividends per share of 65 cents in FY 2022 and then 72 cents in FY 2023. Based on the current Coles share price of $15.74, this implies yields of 4.1% and 4.6%, respectively.
Citi also sees a lot of value in its shares and has a buy rating and $19.60 price target on them.
