Forget term deposits! I'd buy these two ASX 300 shares instead

These stocks are more appealing to me than term deposits.

S&P/ASX 300 Index (ASX: XKO) shares could be a much more appealing investment than a term deposit with the current outlook in mind.

The interest rate of a term deposit is heavily influenced by the official cash rate of the Reserve Bank of Australia (RBA). With uncertainty surrounding the global economy and inflation in Australia seemingly under control, market commentators are expecting the RBA to reduce the rate at least two more times over the rest of 2025, possibly more.

If rates are cut, it would reduce how much passive income future term deposits pay.

Lower rates could push up the valuations of businesses, particularly those known for their attractive dividends. This would have the unfortunate impact of pushing down the dividend yields.

With this dynamic seemingly about to play out, I think it could be a good time to invest in ASX 300 shares like the ones below.

Businesswoman working from home with stock market chart showing percent change on her laptop screen.

Image source: Getty Images

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

This company is an investment conglomerate that has been operating for over 120 years. If I were looking for a resilient business instead of a term deposit, Soul Patts would be one of the ones I'd go for.

The ASX 300 share has a diversified portfolio of investments across different sectors including telecommunications, resources, financial services, swimming schools, agriculture and plenty of others.

A lot of its portfolio is focused on ASX shares, such as Brickworks Ltd (ASX: BKW), New Hope Corporation Ltd (ASX: NHC), TPG Telecom Ltd (ASX: TPG), Tuas Ltd (ASX: TUA), Macquarie Group Ltd (ASX: MQG), BHP Group Ltd (ASX: BHP) and more.

The combination of those various investments has created a source of cash flow for the ASX 300 share that has allowed it to continue paying dividends through all economic conditions.

In terms of the passive income, Soul Patts has grown its dividend every year since 2000. That's the longest-running growth streak on the ASX, which is reassuring to see as an investor.

The last two dividends declared amount to a total of 99 cents per share, which equates to a grossed-up dividend yield of 3.9%, including franking credits.

Rural Funds Group (ASX: RFF)

Rural Funds is a real estate investment trust (REIT) that owns a variety of farm types including cattle, vineyards, almonds, macadamias and cropping.

Commercial property is not as risk-free as term deposits. However, farmland has been an important asset for centuries and I don't think that's going to change anytime soon – people still need farmland to produce food.

Rural Funds' properties are largely leased to large and listed businesses such as Select Harvests Ltd (ASX: SHV) on long-term rental contracts. I think this makes the earnings quite defensive, with interest rates and debt costs being the main unpredictable element of its financials.

The ASX 300 share's rental income is growing thanks to a mixture of inflation-linked increases and annual increases. I expect this will help increase its rental profits and distribution in the longer-term.

It's expecting to pay an annual distribution per unit of 11.73 cents, which translates into a distribution yield of 6.8%.

Motley Fool contributor Tristan Harrison has positions in Brickworks, Rural Funds Group, Tuas, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, Macquarie Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks, Macquarie Group, Rural Funds Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended BHP 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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