Later today the Reserve Bank of Australia will meet to decide on the cash rate. Whilst a rate cut at this meeting looks very unlikely, it is beginning to look inevitable that a cut to 0.5% is coming early next year.
This means that the ultra-low interest rates being offered with term deposits could be about to go even lower.
But don't worry because these ASX dividend shares offer far better yields right now. Here's why I would buy them:
Coles Group Ltd (ASX: COL)
I think Coles would be a great alternative to term deposits. I'm a big fan of the supermarket operator due to its defensive qualities and favourable dividend policy. In respect to the latter, the Coles board intends to pay out 80% to 90% of its profits to shareholders in the future. I believe this bodes well for income investors, especially given its solid long term growth potential thanks to its refreshed strategy and focus on automation. I estimate that its shares currently offer a forward fully franked ~3.5% dividend yield.
Scentre Group (ASX: SCG)
Trading conditions in the retail sector may be tough, but that hasn't stopped consumers from visiting Scentre's Westfield properties in the ANZ market. At the last count, its properties welcomed 535 million customer visits through their doors over the last 12 months. This has unsurprisingly led to strong demand for tenancies from retailers. So much so, 99.3% of its portfolio was leased in September. I believe this puts Scentre in a good position to grow its distribution at a modest rate in the future. At present its units offer a forecast forward 5.8% distribution yield.
Telstra Corporation Ltd (ASX: TLS)
A final option for income investors to consider is Telstra. I think it would be a good option due largely to the early success of its T22 strategy. This strategy is stripping out significant costs and making Telstra a much leaner and smarter operation. Combined with the return of rational competition, the arrival of 5G, and the near completion of the nbn rollout, I believe a return to growth isn't far away for Telstra. For now, though, I am confident its current free cash flows are more than sufficient to maintain its 16 cents per share dividend. As a result, I estimate that its shares offer a forward fully franked 4.2% dividend.
