Tough news for savers

An ASX investor looks devastated as he watches his computer screen, indicating bad news

Dear investor,

On the 3rd of November 2020, the Reserve Bank of Australia cut the official cash rate to just 0.1%.

This marked a new historic point for our country – the lowest the cash rate has ever been, right back since the target rate was introduced in 1990.

And despite rumblings from some economists that rates will have to rise sooner than first thought – the RBA confirms any upwards movement on interest rates is still "unlikely to be until 2024 at the earliest".      

So, what does all this mean?

Whichever way you look at it, we don't think you should expect to generate a lot of money from your bank savings any time soon.

Because interest rates on Australian bank accounts are built off the cash rate. It's a direct relationship – the higher the cash rate, the higher interest rates typically are.

And when the interest rate is this low… well, you get the picture.

In this environment, many are growing concerned for those who rely on their savings accounts to grow their wealth.

Australian Treasurer Josh Frydenberg saying this is "tough news for savers who have put money in the bank".

At the time of writing, ANZ's top savings account interest rate – on their 'Progress Saver' – is 0.35% (after you jump through a few hoops to get it). Interest rates of the other Big 4 banks are around a similar mark.

What that means is, if you put $100,000 in one of these bank accounts, paid no fees, and got their top interest rate for a full 12 months, at the end of the year it would have generated… $350.

$350 for holding $100,000 capital for a full year. Talk about a low return on investment… 

The outlook is clear – if you want your money to work hard for you with a decent return, a savings account is not going to cut it.  

In fact, it's likely to be outpaced by inflation, and you may well end up steadily 'losing money' as your spending power erodes.

So where can you turn to earn a decent return on your money?

Somewhere that doesn't just generate a return on investment, but also puts cash back in your hand in the interim?

Dividend shares

In today's environment, we think the dividend yields on offer from quality ASX shares looks like an utterly compelling alternative to term deposits or bank interest rates.

When you can find a high-quality company that's paying out steady, fully-franked dividends of 3%, 4%, 5% or more – and has the very real prospect of significant stock price growth – it's easy to see why investors have been flocking to buy dividend shares.

But how do you know which stock to choose? It can be a hard job to find the diamonds in the rough of the stock market.

Yet, sometimes there are opportunities that just scream out to you with extremely strong BUY cases… 

And while Edward Vesely, lead investor of The Motley Fool's Dividend Investor service, has found quite a few of them… right now there's one huge potential opportunity which has caught his eye.

A high-quality ASX company, a fast-growing stock with an anticipated long growth runway…

And which pays a truly massive, fully-franked dividend… more than 10x the current savings rate!

Ed is calling this one his Monster Dividend Stock for 2021.

And he believes it could be a perfect time to buy it now.     

There's just one catch.

Ed is sharing the details of this stock ONLY with members of his yield-focussed investing service, Motley Fool Dividend Investor.

Now, if you're not familiar with Dividend Investor, it's the stock service created to provide simple, high-return, dividend-paying stock recommendations to individual investors like you and me.

It has a regular schedule – Ed and his team publish the ASX stocks they believe investors should be buying right now, each and every month.

And rather than focussing on dusty blue-chip stocks, Ed has generated a track-record of success by looking outside the usual suspects, finding 'under the radar' stocks that deliver both yield and growth.

Which brings me back to this Monster Dividend Share I'm banging on about today.

Ed has published a comprehensive report inside Dividend Investor which shows you exactly why he thinks this is such a great opportunity.

And if you sign up for Dividend Investor today, you'll get full access. You can read all of the details on this stock directly from him and his team.

I urge you to take action today to get your report, titled "The ASX's Monster Dividend Stock 2021". It's right there in Dividend Investor waiting for you. Simply enter your email address below for more information.

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Returns as of 23 May 2024. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. For more information about The Motley Fool see our Financial Services Guide. All returns cited are hypothetical and based on the percentage change between the stock price at the time of recommendation and the current or sell price (if the position has been closed) at the time of publication. Brokerage, taxes and any other associated costs are not taken into account. Please remember that investments can go up and down. Past performance is not necessarily indicative of future returns. Performance figures are not intended to be a forecast and The Motley Fool does not guarantee the performance of, or returns on any investment. Any money back guarantee is strictly limited to the subscription price paid for the product.