While term deposit rates are improving, they don't compare to some of the yields that are on offer with ASX 200 dividend shares.
For example, the two shares listed below are forecast to offer very big yields. In addition, unlike term deposits, they have the potential to generate big capital gains as well.
Here's what you need to know:
National Australia Bank Ltd (ASX: NAB)
The first ASX 200 dividend share that could be a buy is NAB.
As well as the eponymous NAB brands, this big four bank also owns the UBank and Bank of New Zealand brands. It also recently paid $1.2 billion for Citigroup's Australian consumer business.
Goldman Sachs is a fan of the company due to its exposure to commercial lending. It said:
Our Buy rating on NAB is predicated on: i) we see volume momentum over the next 12 months as favouring commercial volumes over housing volumes, and we believe NAB provides the best exposure to this thematic.
As for dividends, Goldman is expecting fully franked dividends of $1.66 per share in FY 2023 and FY 2024. Based on the current NAB share price of $25.78, this implies yields of 6.4% in both years.
Goldman Sachs has a buy rating and a $30.69 price target on its shares.
South32 Ltd (ASX: S32)
Another ASX 200 dividend share that has been named as a buy is South32.
Morgans likes the mining giant due to its belief that it is well-positioned after making some big changes to its portfolio in recent years. This gives it exposure to some commodities that will be vital to the decarbonisation megatrend.
The broker commented:
We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earnings-linked dividend policy.
As for dividends, Morgans has pencilled in fully franked dividends per share of 17.8 cents in FY 2023 and 22.3 cents in FY 2024. Based on the current South32 share price of $3.72, this will mean yields of 4.8% and 6%, respectively.
Morgans currently has an add rating and a $5.60 price target on South32 shares.
