I'm always on the lookout for high-yield ASX dividend shares that can provide a mixture of pleasing passive income and capital growth.
Australia appears to be at a point where interest rates may reduce to a more normalised level in the next 12 months, which would make defensive, dividend-paying businesses particularly appealing today. So, this could be a good time to invest.
The two businesses I'll point to have good dividend yields today and could deliver growth in the future.
Let's start with the bigger of the two high-yield ASX dividend shares.
Telstra Group Ltd (ASX: TLS)
Telstra is the leading telecommunications business in Australia, with the most subscribers, the widest network coverage, and the strongest spectrum assets.
The company has a strong economic moat because it has the best network. This attracts more customers, gives it the most scale, and allows it to invest further in its network.
I view additional subscribers as very beneficial for Telstra because they spread the cost of the network across more users, which boosts profit margins.
With Telstra's underlying profit steadily rising, I think this can fund higher dividend payments in the coming years. In the Telstra FY25 half-year result, profit for shareholders grew by 6.5%.
The latest two dividends declared by the high-yield ASX dividend share come to a grossed-up dividend yield of 5.8%, including franking credits. The broker UBS' projections suggest the grossed-up dividend yield could reach 8.5% by FY29, including franking credits.
Rural Funds Group (ASX: RFF)
This is a real estate investment trust (REIT) that owns farmland across Australia in different subsectors and climates. Its main farm types are almonds, cattle, macadamias, and vineyards.
The higher interest rates have been a headwind for the Rural Funds unit price, but this has pushed up the distribution yield for prospective investors.
It expects to pay an annual distribution of 11.73 cents in FY26, representing a forward distribution yield of 6.5%.
I think Rural Funds can grow its distributions in the future as rental income grows. It's expecting to grow its adjusted funds from operations (AFFO) per unit – the net rental profit – by 4% in FY25. This is being driven by contracted rental increases with fixed annual rises, or the rent is linked to inflation, plus market reviews.
In my view, this business could be a significant beneficiary of further interest rate cuts by the RBA.
