With the interest rates on offer with term deposits barely keeping up with inflation, I think income investors ought to look to the share market for a passive income.
After all, the Australian share market has an average dividend yield of ~4%. This is vastly superior to anything you'll get from a term deposit right now.
But which shares should you buy? Here are three options to consider:
Macquarie Group Ltd (ASX: MQG)
I think Macquarie is one of the highest quality companies in the country and a great long term option. This is due to the quality and diversity of its operations and its talented management team. Combined, I feel it is well-positioned for strong earnings and dividend growth over the next decade even when the big four banks may be struggling. At present Macquarie's shares offer a partially franked trailing dividend yield of approximately 4%.
Stockland Corporation Ltd (ASX: SGP)
Another top option for income investors to consider is Stockland. It is a leading property company which owns, manages, and develops a range of assets including retail centres and residential properties. After a strong performance in FY 2019, Stockland has continued its positive form in FY 2020. In light of its positive start to the year, I estimate that its shares offer a generous forward 5.7% distribution yield.
Sydney Airport Holdings Pty Ltd (ASX: SYD)
With rates set to stay lower for longer, I think this bond proxy would be a good option for income investors. Bond proxies are shares that are expected to offer predictable returns over a long period of time, much like a traditional bond. So, when bond yields offer insufficient income, investors will turn to them instead. Which could be a good thing. Because due to its position as the main gateway into Australia and its growing ancillary revenues, I believe it is well-placed to grow its dividend. At present the airport operator's shares offer an estimated forward 4.5% dividend yield.
