Earlier this month the U.S. Federal Reserve raised interest rates for a second time in 2017.
But unfortunately for Australians in search of income, it seems unlikely that the Reserve Bank will be following in its footsteps any time soon.
This means that the paltry rates on offer from savings accounts and term deposits aren't likely to improve in the near future.
In light of this, I think savers should look to the Australian share market for a source of income. Especially considering the average dividend yield on the ASX at the moment is 3.7%.
Three cheap dividend shares which I would consider are as follows:
Dicker Data Ltd (ASX: DDR)
Thanks largely to new vendor agreements and favourable market trends, this founder-led wholesale computer hardware company delivered net profit after tax growth of 25% in FY 2016. Management appears confident that these market trends will continue to drive its profit growth this year. So much so it has advised that it plans to pay a fully franked 16.4 cents per share dividend. That equates to a 6.9% yield at the current share price.
Premier Investments Limited (ASX: PMV)
Following a sell-off of the retail sector, the shares of the company behind brands including Smiggle and Peter Alexander have fallen almost 12% year-to-date. This has left them trading at 19x trailing earnings and providing a trailing fully franked 4% dividend. With the Smiggle brand's expansion overseas both successful and aggressive, I believe this is a reasonably cheap price to pay for a company with such strong growth prospects.
Telstra Corporation Ltd (ASX: TLS)
Concerns over increased competition and lower-than-expected NBN margins have weighed heavily on Telstra's shares in the last 12 months. This decline means the telco giant now provides a trailing fully franked 7% dividend. While there are fears that this dividend could be unsustainable, I believe cost-savings and its market-leading position will allow it to not only maintain this dividend, but potentially increase it periodically over the next few years.
