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Forget saving, buy these 3 ASX blue-chip dividend shares for income

Lina Lim
dividends, growth, savings, investing

If interest rates get any lower, savers will be the ones paying the bank for a deposit! Luckily, there are plenty of opportunities for investors to pivot into the equity market for income.

Here are 3 ASX 200 blue-chip shares that provide investors with a reliable income that will outpace your savings account.

1. BHP Group Ltd (ASX: BHP)

It’s been a phenomenal year for ASX iron ore miners due to the significant appreciation of the iron ore spot price. This has meant that miners finished the financial year with pockets full of cash, with BHP’s profits increasing 124% in FY19.

The iron ore spot price has softened in recent times due to the world’s biggest iron ore miner, Vale SA, coming back online following a dam disaster. However, there are many reasons why the mining sector will remain a solid dividend play in the short term.

While the iron ore spot price is softer, the weak Australian dollar will continue to support miner profits. On the demand front, Chinese steel mill profit margins are still very strong while the Chinese government has made a policy push in infrastructure and construction.

BHP currently pays a dividend yield of 5.5%.

2. WAM Capital Ltd (ASX: WAM)

WAM is one of my favourite picks for a reliable dividend stock. The company is a listed investment company that provides investors exposure to an actively managed diversified portfolio of undervalued growth companies, which are generally found in the small to medium industrial sector.

In the company’s October update it cited that the portfolio had outperformed the S&P/ASX All Ordinaries Accumulation Index by 0.8%. This was driven by outperformances in automotive repair and aftercare provider AMA Group (ASX: AMA) and pizza delivery service Domino’s Pizza Enterprises (ASX: DMP).

WAM has a strong track record of consistent and growing dividends for the past decade and currently pays a fully franked dividend yield of 7.0%.

3. Australia and New Zealand Banking Group (ASX: ANZ)   

ANZ reported a challenging operating environment in FY19 with statutory net profit after tax falling 7% while earnings per share improved by 2%. Even though business conditions are tough, I believe ANZ is the best big 4 bank for reliable dividends.  

ANZ is the only big 4 bank with a common equity tier 1 (CET1) capital ratio that is greater than 11%. Its peer the Commonwealth Bank of Australia (ASX: CBA) was forced to cut its dividends by 90 basis points to support a strong capital position, while the Westpac Banking Corp (ASX: WBC) initiated a $2.5 billion capital raising to strengthen its balance sheet.

Furthermore, ANZ was the only bank that maintained its dividend year on year at a sustainable dividend payout ratio of 70%. ANZ currently pays a dividend  yield of 6.3%. 

The post Forget saving, buy these 3 ASX blue-chip dividend shares for income appeared first on Motley Fool Australia.

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Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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