3 big fully franked dividend shares I'd buy to beat the pathetic returns on cash

What are the best dividend shares to buy?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This afternoon the Reserve Bank of Australia cut Australia's benchmark cash lending rate to a record low of just 1% which means the banks are likely to offer cash savers or term depositors even lower rates of return.

For example the National Australia Bank Ltd (ASX: NAB) currently offers just 1.3% on its callable cash savings accounts or 1.9% on a 12-month term deposit. At these kind of joke rates once you adjust for inflation around 1.3% your money is worth pretty much nothing or potentially even eroding in value!

No wonder so many people are looking to fully franked dividends to smash the pathetic returns on cash.

But it's no use blindly buying fully franked dividend shares if they might erode in value. You must stick to the basics of buying good companies on reasonable valuations.

Here are three I'd happily put a little money into today as part of a balanced investment portfolio.

Accent Group Ltd (ASX: AX1) is the footwear retailer that can grow via wider margins, more sales, or new store openings. It sells for $1.39 today and offers a trailing yield of 5.9% plus full franking credits which is pretty impressive given its guiding for another year of strong double-digits profit growth.

I expect the stock looks conventionally cheap as sentiment around the consumer-facing retail sector is low, however, this may present an opportunity to anyone with a 3 to 5 year time horizon.

ARB Corporation Ltd (ASX: ARB) is a founder-led 4-wheel drive automobile parts supply business that has a long track record of fully franked dividend growth. Much of its growth is also organic and it has no net debt which is a common positive of founder led businesses. 

Dicker Data Ltd (ASX: DDR) is another founder-led IT hardware distribution business that pays quarterly fully franked dividends and offers an estimated annual yield of 4.2% plus franking credits based on a share price of $5.34. It's also forecasting another strong year of double-digit profit growth to mean it could offer solid total returns to investors over 3 to 5 years.

Of course all three of these businesses carry plenty of downside risks as well, so I would not suggest betting the house on any of them. However, I'd certainly prefer putting some cash in them over leaving too much at the bank.

Motley Fool contributor Tom Richardson owns shares of Accent Group and Dicker Data Limited. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia has recommended Accent Group and ARB Limited. 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.

More on Share Market News

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why BHP, Catalyst Metals, Mesoblast, and Pilbara Minerals shares are shooting higher

These shares are ending the week with a bang. But why?

Read more »

Disappointed man with his head on his hand looking at a falling share price his a laptop.
Share Fallers

Why 29Metals, Atlas Arteria, DroneShield, and Yancoal shares are falling today

Let's see why these shares are ending the week in the red.

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Record Highs

Big ASX 200 news! Market hits 8,700-point record high

It's a historic day for the ASX.

Read more »

Miner with thumbs up at mine
Broker Notes

Up 55% this year, does Macquarie rate Gold Road Resources shares a buy, hold or sell?

Does this strong performing gold miner have more room to run?

Read more »

Two happy woman on a couch looking at a tablet.
Opinions

Why I'm excited to see the results of these ASX 200 shares

These stocks could reveal very interesting insights.

Read more »

couple having a happy discussion with a banker
Healthcare Shares

Expert: 4 ASX healthcare stocks to buy ahead of reporting season

Could these ASX healthcare stocks be good additions to your portfolio?

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Broker Notes

Morgans names 3 ASX stocks to buy

The broker is feeling very positive on the investment opportunities here.

Read more »