With interest rates highly likely to fall this week when the Reserve Bank of Australia (RBA) meets, the yields on offer with term deposits will almost certainly be taken lower.
In light of this, the share market arguably remains the best place for investors to generate income from their hard-earned money.
But which ASX dividend shares would be good alternatives to term deposits? Let's look at three that analysts rate as buys:
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Harvey Norman Holdings Ltd (ASX: HVN)
The first ASX dividend share for income investors to consider is Harvey Norman.
As well as its leadership position in household goods and electronics, the company owns a large portfolio of valuable retail property. This supports its earnings and allows it to pay out generous, fully franked dividends even during periods of retail weakness.
Though, Bell Potter isn't expecting the company to have to rely on its property earnings right now. With interest rate cuts on the horizon, housing activity expected to lift, and artificial intelligence driving a new wave of mobile and computer upgrades, the broker believes Harvey Norman is well positioned for growth.
As a result, it has put a buy rating and $6.00 price target on its shares.
As for dividends, its analysts are forecasting fully franked payout of 25.4 cents per share in FY 2025 and 28.1 cents per share in FY 2026. Based on its current share price of $5.35, this equates to dividend yields of 4.75% and 5.25%, respectively.
IPH Ltd (ASX: IPH)
Another ASX dividend share that could be a buy for income investors is IPH. It is Australia's leading intellectual property services firm, assisting companies with patents, trademarks, and legal protection.
IPH benefits from a defensive business model, recurring revenue streams, and a global growth footprint. This makes it a reliable dividend payer even during tougher economic conditions.
Analysts at Morgans are positive on IPH and have an add rating and $6.30 price target on its shares.
In respect to dividends, the broker is forecasting fully franked dividends of 35 cents per share in FY 2025 and then 36 cents per share in FY 2026. Based on the current IPH share price of $4.94, this will mean dividend yields of 7.1% and 7.3%, respectively.
Telstra Group Ltd (ASX: TLS)
A final ASX dividend share that could be a good alternative to term deposits is Telstra.
Australia's largest telco offers investors a defensive business model with recurring revenues. And following its recent turnaround, Telstra's dividend outlook is looking positive again.
The team at Morgan Stanley is positive on the company and has put an overweight rating and $4.70 price target on its shares.
As for income, the broker is forecasting fully franked payouts of 19 cents per share in FY 2025 and then 20 cents per share in FY 2026. Based on its current share price of $4.53, this would mean dividend yields of 4.2% and 4.4%, respectively.
