On Tuesday the Reserve Bank of Australia finally made a move on the cash rate and cut it down to a record low of 1.25%.
According to the Westpac Banking Corp (ASX: WBC) economics team, this is likely to be the first of three cuts over the next seven months.
The most recent Westpac Weekly economic report reveals that it continues to expect the central bank to cut rates again in September and then once more in December. This will leave the cash rate at just 0.75%.
In light of this, I think now would be a good time to consider rotating out of term deposits and into some of the generous dividend options that the Australian share market has to offer.
Three which I would buy are listed below:
Coles Group Ltd (ASX: COL)
One of my favourite dividend options on the local market is this supermarket giant. I'm a big fan of Coles due to its leading position in a highly defensive industry and management's focus on margin improvement through automation. If the latter is a success and the company can continue to grow its sales over the coming years, it could lead to solid profit and dividend growth over the medium to long term. Based on its dividend policy, I estimate that its shares currently provide a forward fully franked 4.4% dividend yield.
Telstra Corporation Ltd (ASX: TLS)
Another dividend option to consider buying is this telco giant. Although its shares have been on fire this year due to its improved performance and the early success of its T22 strategy, I still see value in them. This is especially the case for income investors now that the telco giant has begun to cut its dividend to a sustainable level. In the first half Telstra reduced its interim dividend to 8 cents per share and is widely expected to do the same with its final dividend in August. At 16 cents per share, Telstra offers an attractive fully franked 4.4% dividend yield.
Westpac Banking Corp
Given how paltry the interest rates are on savings accounts right now, I would sooner invest in this banking giant's shares than leave my money in one of its accounts. Especially with the housing market looking as though it may be close to bottoming. This could drive mortgage loan growth and boost the bank's bottom line. At present Westpac's shares provide a very generous trailing fully franked 6.9% dividend yield.
