With the RBA cutting interest rates again yesterday to 1%, I think it's important that people think about where else they can achieve the desired income.
There's no doubt that investing in ASX dividend shares is riskier, in the shorter-term at least, than cash. Values of shares can go down, quite rapidly in some cases. But don't forget they can go down too.
That's why I'd be interested in the following ASX dividend shares instead:
Rural Funds Group (ASX: RFF)
Rural Funds has a projected FY20 distribution yield of 4.7% if the 10.85 cents per unit guidance comes to fruition.
The great thing about Rural Funds is that it's a real estate investment trust (REIT), meaning that it receives regular rental income from its tenants, giving it a secure income stream and good net rental visibility. Indeed, management confidently predict distribution growth of 4% per annum based on the rental indexation built into the contracts.
It has a weighted average lease expiry (WALE) of 11.4 years, suggesting long-term locked-in rental income.
With farms spread across multiple industries including cattle, poultry, cotton, vineyards, almonds and macadamias, Rural Funds seems like a quality & diversified REIT to me.
Magellan Global Trust (ASX: MGG)
A decreasingly attractive Australian interest rate could make the AUD fall, which could make overseas-focused investments more attractive. This listed investment trust (LIT) is one of the best-performing listed entities and could continue to do well with its global investment mandate.
It targets a 4% distribution yield for investors and is invested in global winners like Alphabet (Google), Facebook, Apple, MasterCard, Visa, Starbucks and Microsoft.
With a decent cash position, around 12% of the portfolio at the end of May 2019, I think Magellan Global Trust is a good option for defence, growth and income.
Vitalharvest Freehold Trust (ASX: VTH)
Vitalharvest is a bit of a left-field choice. It's also a REIT, but it currently leases all of its farms to Costa Group Holdings Ltd (ASX: CGC) which it has a profit-share agreement with.
Costa pays an 8% base rent for Vitalharvest's assets and also a 25% share of earnings before tax (EBT) from operations at the properties.
Currently some of the citrus farms are facing fruit fly issues and some of the berry farms are experiencing "crumbly" berries, but I think this means it could be an opportune time to buy shares whilst there are short-term concerns.
Over time I expect Vitalharvest will acquire additional farms that aren't leased to Costa, expanding its portfolio and adding diversification.
Foolish takeaway
At the moment, the investor in me would go for Vitalharvest because of the issues it's currently facing, which shouldn't take too long to resolve. Rural Funds could be an excellent income choice and Magellan Global Trust could produce strong total returns over the coming years.
