Whilst the odds of a rate cut at the Reserve Bank of Australia's August meeting are reasonably slender, I think it is inevitable that the central bank will cut rates again by the end of the year.
This would be very bad news for anyone that is living from the income generated by term deposits.
At present a 60-month term deposit from Commonwealth Bank of Australia (ASX: CBA) currently provides a 1.8% per annum interest rate for funds greater than $50,000.
If the cash rate goes lower again, this rate could end up closer to 1.5%, which is barely keeping up with inflation.
In light of this, I think income investors ought to consider replacing term deposits with these quality dividend shares:
Coles Group Ltd (ASX: COL)
I think this supermarket giant could be a good replacement for a term deposit. This is due to the company's defensive qualities, strong market position, cost reduction targets, and favourable dividend policy. In respect to the latter, Coles intends to pay out 80% to 90% of its earnings to shareholders each year. I estimate that this means its shares currently provide a forward fully franked 4% dividend yield.
Scentre Group (ASX: SCG)
Scentre Group is the owner of Westfield properties in the ANZ region. Its properties attract hundreds of millions of visits each year, which unsurprisingly has led to strong demand for tenancies from retailers. At its last update the company reported a sky high occupancy rate of 99.3%. I believe this has positioned it well to deliver on its plan to pay a 22.6 cents per security distribution this year, which currently equates to a 5.7% yield.
Stockland Corporation Ltd (ASX: SGP)
Stockland is a diversified Australian property company which owns, manages, and develops shopping centres, housing estates, industrial estates, and retirement villages. This year Stockland expects to grow its FFO per security by ~5%. In light of this, it recently declared a final distribution of 14.1 cents per security, which brought its full year distribution to 27.6 cents per security. This means its units currently offer income investors a trailing 6% distribution yield.
