The Reserve Bank of Australia (RBA) might have held off on another interest rate cut this month, but we’re by no means out of the woods yet. At least one rate cut in 2020 is still very much on the cards, which, if carried out, would see our cash rate at an unprecedented 0.5%.
At this level government bonds, bank accounts and term deposits would be next to worthless (not that they’re much better today anyway).
That brings us to dividend-paying shares – one of the only real options left for us investors looking for a decent inflation-beating yield. Here are 2 that I think are worthy of consideration for such a purpose.
Westpac Banking Corp (ASX: WBC)
Westpac shares have ben through the wringer during November. Allegations that the bank may have breached anti-money laundering laws up to 23 million times is not a good look for any company – but especially not for a bank just coming out of a bruising Royal Commission looking to rebuild brand confidence.
But for every cloud, a silver lining. Westpac’s share price today offers us a chance to bank Westpac’s (recently cut but still) generous $1.60 per share yield at a lower cost. On today’s pricing, this payout is worth a 6.44% yield (or 9.2% grossed-up with full-franking) – which is enough to turn any income investor’s head.
Even if Westpac is forced to trim this dividend further in 2020 (which isn’t unlikely given the fine it might be hit with), it’s my opinion that it will still be a market-beating income stock. Thus, I think Westpac is a solid buy for share market income today.
Transurban Group (ASX: TCL)
Transurban has been known as a top income stock for a few years now, but its ‘bond proxy’ status has garnered fresh attention throughout this year and in my view is partly responsible for TCL shares rising nearly 35% YTD.
Bond proxy is a term used to describe dividend shares whose cashflows are so reliable they can be thought of as a bond substitute. Seeing as Transurban makes its dough from its vast network of tolled roads (many of which are hard-to-avoid arterial highways), its earnings have always been viewed as rock-solid. Having inflation-linked toll price rises contracted into many of their projects is an added bonus.
On current prices, TCL shares are offering a yield of 3.85%, which is still a decent return on your cash. Thus, I think for anyone looking for a safer dividend share, Transurban would make a worthy choice.
With these 2 ASX dividend shares, I think we have 2 solid choices that have the potential to return a decent amount of cash to you though dividend income. Whilst the Westpac share price is looking attractive to me at current levels, I think Transurban is a much safer bet today given what’s been happening at our oldest bank lately.
The post 2 generous ASX dividend shares to buy for yield appeared first on Motley Fool Australia.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019