ASX dividend shares look like a good investment right now because of the passive income they offer and the high chance of further official cash rate cuts by the Reserve Bank of Australia (RBA).
Dividends can be a great source of cash flow for investors, and that could become increasingly valuable for Aussies the lower the RBA official cash rate goes in the next year or two.
I'm not expecting any particular number of rate reductions, but some economists seem confident that there could be three rate cuts in the next 12 months. Time will tell whether those predictions are right or not.
With that in mind, I'll discuss two ASX dividend shares that look appealing in the current environment and that I'd happily put $5,000 into.
Rural Funds Group (ASX: RFF)
Rural Funds is a real estate investment trust (REIT) that owns a diversified portfolio of farmland across the country in subsectors such as almonds, macadamias, cattle, and vineyards.
The business has high-quality tenants that are largely listed entities, with blue-chip names such as JBS, Select Harvests Ltd (ASX: SHV), and Treasury Wine Estates Ltd (ASX: TWE).
Rural Funds has maintained or grown its cash distribution each year since it started paying one over a decade ago. That's a pleasing level of consistency. With falling interest rates, I think Rural Funds' rental profit outlook is much better than it was a year ago. A lower interest rate could also increase the value of the farms.
Its rental income is growing thanks to contracted rental increases, which are largely either fixed annual rises or linked to inflation, plus market reviews. In the long-term, I think this will help maintain and grow Rural Funds' distributions.
At the current Rural Funds unit price, it's trading at a 43% discount to its adjusted net asset value (NAV) as of 31 December 2024.
The ASX dividend share is expected to pay a distribution per unit of 11.73 cents, translating into a forward distribution yield of 6.6%.
MFF Capital Investments Ltd (ASX: MFF)
I believe that the ASX share market is a wonderful place to invest, but I also think the global share market is a fantastic asset class to have exposure to. The ASX is only a small part of the global economy, so we may be missing out on other opportunities by not getting exposure to that segment of the market.
Investing in an exchange-traded fund (ETF) is one way to get that exposure, but I also like listed investment companies (LICs) because they can provide passive income and be selective about which stocks to own.
Most of MFF's focus is on investing in quality international shares. Some of its biggest holdings include Alphabet, Mastercard, Amazon, and Visa. These are the kinds of global blue-chip shares I expect to be capable of producing long-term profit growth and unlocking further share price gains. MFF also has a small but growing funds management business called Montaka, which could help provide useful earnings in the future and add research capabilities to MFF.
The business has grown its annual ordinary dividend each year since 2018. It's expecting to pay a grossed-up dividend yield of 5.3% in FY25, including franking credits. It's currently trading at a 10% discount to its pre-tax net tangible assets (NTA) from 23 May 2025.
