Forget savings accounts and buy these ASX dividend shares

Here's why these shares could be superior to putting money in saving accounts.

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While interest rates have increased materially over the last 12 months, the share market still appears to be king when it comes to yields.

For example, Commonwealth Bank of Australia (ASX: CBA) currently offers a standard variable rate of 2.35% on its NetBank Saver accounts, excluding short-term bonuses.

And while its term deposits are better and currently sit at 3.95% on 60-month terms, they still fall short of what you can find from ASX dividend shares on the Australian share market.

In addition, they don't come with the potential to grow your capital. You simply get back what you put in.

As a comparison, the two ASX dividend shares listed below offer both bigger yields and the potential for big capital gains. This could arguably make for a much more compelling risk/reward.

Here's what you need to know about them:

Telstra Corporation Ltd (ASX: TLS)

Telco giant Telstra could be a great alternative to saving accounts. As well as having a defensive business, it has been tipped to provide investors with a growing income stream.

For example, Goldman Sachs is forecasting fully franked dividends of 18 cents per share dividends in FY 2024, 19 cents per share in FY 2025, and then 20 cents per share in FY 2026. Based on the current Telstra share price of $3.91, this equates to yields of 4.6%, 4.85%, and 5.1%, respectively.

In addition, Goldman has a buy rating and a $4.70 price target on the ASX dividend share, which implies a 20% upside for investors.

Transurban Group (ASX: TCL)

Another ASX dividend share that could be worth considering is toll road operator Transurban.

Once again, it has attractive defensive qualities and has been tipped to pay growing dividends in the coming years.

Citi is forecasting dividends per share of 63 cents in FY 2024, 65 cents in FY 2025, and 68 cents in FY 2026. Based on the current Transurban share price of $13.67, this will mean yields of 4.6%, 4.75%, and 5%, respectively.

The broker also sees plenty of upside for its shares. It has a buy rating and a $15.90 price target, which suggests that they could rise 16% over the next 12 months.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Transurban Group. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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