3 all-star ASX dividend stocks I'd own in retirement to combat falling interest rates

I reckon these three dividend stocks will be worth holding when rates are cut.

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Much of the investing environment of the past few years has been characterised and shaped by the massive and historically steep run of interest rate rises we've all endured. That includes ASX dividend stocks.

Cast your minds back to early 2022, and interest rates were still at the pandemic-induced, record low of 0.1%. But since then, the Reserve Bank of Australia (RBA) has conducted one of the most dramatic pivots in its history.

Thanks to a long string of interest rate rises since 2022, the cash rate today now stands at 4.35%. The last interest rate rise we got was only back in November last year.

Yet most commentators are now expecting the RBA's next move to be an interest rate cut. Whenever that may be.

The last time interest rates were as high as they are today was in the early 2010s. So it's very possible that the average interest rate over the next five years will be lower than the current 4.35%.

If that happens, it could have significant impacts on the ASX share market. Income investors and retirees are particularly sensitive to interest rates. When rates are high, many prefer to use safer investments like term deposits instead of ASX dividend stocks.

But I still think dividend stocks are the better choice for a retired nvestor.

So today, let's discuss three all-star dividend stocks I'd own for a lower interest rate world.

3 all-star ASX dividend stocks for a lower-rate world

Transurban Group (ASX: TCL)

First up is toll road operator Transurban. Now Truansurban was a seemingly safe ASX dividend stock that gave investors a nasty shock during the pandemic. However, I don't think it's wise to judge the company's dividend credentials on that.

The fact remains that Transurban has a unique advantage that makes it a potential dividend stock all-star in both night and low interest rate environments. That advantage is that Transurban has the right to increase many of its road tolls every quarter by the rate of inflation, or 4% – whichever is higher.

This was a talisman for this company in the low-inflation days before the pandemic. Although inflation (and therefore interest rates) was exceptionally low between 2016 and 2020 (under 2% per annum), Transurban was still allowed to keep raising its tolls every quarter by an annualised 4%.

If the RBA moves Australia back to a low-rate environment going forward, this is the reason I'd be looking at this dividend stock.

Coles Group Ltd (ASX: COL)

Coles is another stock I'd have full confidence owning in a falling rate economy. As a consumer staples ASX dividend stock, Coles has the advantage of being able to attract customers through thick and thin.

However, that doesn't mean the company won't benefit from falling interest rates. Falling rates mean customers have more money to spend in their pockets. Coles will be able to directly benefit from this, with consumers being less sensitive to price discounts.

Coles stock has already demonstrated its dividend all-star status, having delivered several hikes to its shareholder payouts (and no cuts) in recent years. As such, it would be another dividend stock I'd be happy to hold in a low-rate economy.

JB Hi-Fi Ltd (ASX: JBH)

Finally, let's discuss electronics and appliances retailer JB Hi-Fi. I've long admired JB for its ability to move with the times and deliver relevant goods to its customers. It doesn't sell too much hi-fi equipment these days, for example.

JB is the kind of retailer that is in line to benefit more than most from falling interest rates. If the RBA wishes to stimulate the economy with rate cuts, one of the first things many Australians will probably do is head out and upgrade their fridge, television or mobile phone. And JB is a choice destination for many Aussies to do so.

JB has had to trim its dividends over the past 12 months or so, no doubt due in part to rising rates. But I would expect this trend to reverse if rates start going down, and would therefore be very happy to buy JB shares in anticipation of this.

Motley Fool contributor Sebastian Bowen 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 Transurban Group. The Motley Fool Australia has positions in and has recommended Coles Group. The Motley Fool Australia has recommended Jb Hi-Fi. 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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