Yesterday, we got some unfortunate news. The national unemployment rate has risen from 5.1% to 5.3%. It's no secret that the Australian economy has had some headwinds recently.
Between bushfires, the coronavirus and an already sluggish economy, the Reserve Bank of Australia (RBA) looks set to consider yet more interest rate cuts this year. And the employment statistics released yesterday just made that a whole lot more likely.
Another rate cut in 2020 would mean even lower returns from bank accounts, term deposits and other forms of interest-bearing assets. That's why looking at ASX dividend-paying shares today could be a good way to plan ahead.
So, here are two ASX dividend shares that I think would make great hedges against another RBA interest rate cut.
Sydney Airport Holdings Pty Ltd (ASX: SYD)
This is one of those rare companies whose name tells you exactly what it is. Sydney Airport owns and operates the only commercial airport in Sydney (at least until 2024) and thus, has a virtual monopoly in its market.
This enables the company to charge almost what it likes on passenger entries, aircraft landing and (infamously) parking. This isn't such good news for frequent travellers, but it is good news for Sydney Airport's shareholders.
The company has long paid a substantial dividend, and today investors can get a piece of the action with a 4.64% yield. Considering the relatively safe earnings base of Sydney Airport, I think the risk/reward balance for this dividend is worth a buy for income today.
WAM Research Limited (ASX: WAX)
WAM Research is an income-focused Listed Investment Company (LIC) that operates mostly in the mid-cap space of ASX shares. By buying what its management perceives to be undervalued growth companies and selling them once they appreciate, WAM Research is able to stockpile a profit reserve which it can then pay out to its shareholders as fully franked dividends. The current profit reserve stands at 30.1 cents per share – which is enough to cover around three years' worth of dividend payments.
Today, WAM Research pays an annualised dividend of 9.8 cents per share, which translates to a whopping 6.36% yield (or 9.09% grossed-up with franking). For such a market-leading yield, I think it's hard to pass up this LIC for dividend income today – although it is worth noting that WAX shares trade at a 27% premium to the underlying Net Tangible Asset value at the current time.
