Term deposits are an effective tool for Aussies to protect their capital and still generate pleasing interest income. But, I think certain ASX shares could be a more appealing option for passive income.
ASX shares do come with higher risk than a term deposit because share prices can drop. But, share prices can rise too – they can deliver potential gains.
Today, I want to focus on why both of the following businesses could be better options than term deposits.
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Shaver Shop Group Ltd (ASX: SSG)
Shaver Shop is a leading retailer of male and female grooming products such as electric shavers, clippers, trimmers and wet shave items.
On the dividend side of things, the business increased its payout each year between 2017 (when it started paying cash to shareholders) and 2023. The company maintained its dividend in 2024 and then increased its payout in 2025. Dividends aren't guaranteed, of course.
Term deposits provide consistent payouts without cuts or growth, while Shaver Shop has delivered payments with growth in all but one year (with no cuts along the way).
The business paid an annual dividend per share of 10.3 cents per share. At the current Shaver Shop share price, that translates into a grossed-up dividend yield of 10.2%, including franking credits.
I'm optimistic the business can continue growing its profit, and therefore the payouts, by expanding its store count (beyond the current 125), growing its own brand called Transform-U, gaining more exclusive products from top shaving brands and benefiting from the ASX share's scale.
Rural Funds Group (ASX: RFF)
Rural Funds is another pleasing option for passive income compared to term deposits, in my view. It's a real estate investment (REIT) that owns farmland across Australia in different states and climatic conditions.
It owns cattle, almonds, macadamias, vineyards and cropping, giving the business pleasing diversification and reducing risks. This strategy also means it can search across a wide array of assets to find the best opportunity in terms of the combination of income and long-term growth.
The business increased its distribution each year between 2014 to 2022. It has maintained its payout each year since then, despite the headwinds of higher interest rates. It has guided that it's going to pay the same amount in FY26, which translates into a future distribution yield of 5.75%.
I think its payout can grow in the coming years as its rental income grows – its farms have rental growth built-in, with either fixed annual increase or the growth is linked to inflation.
It's trading at attractive value, in my opinion, and I think it's a good, defensive option to own for the long-term.
