I think it could be a good idea to consider replacing your term deposit with ASX dividend shares.
Term deposits provide a safe source of income for people. But with Australia's interest rate now at an extremely low 0.25%, I think it's no good if you're trying to live off the income.
ASX dividend shares could be the answer. The coronavirus has caused investors to sell off most shares. This has the pleasing effect of boosting the trailing dividend yield for potential investors.
However, I think some dividend shares are facing a difficult 2020. But there are some dividend shares I'd be happy to buy today for income for the long-term:
Rural Funds Group (ASX: RFF)
This is a farmland real estate investment trust (REIT). It has an aim of increasing its distribution by 4% every year for the foreseeable future. Rural Funds has been totally successful with that goal so far, partly thanks to automatic rental indexation.
It has a diversified asset base of different farms including almonds, macadamias, vineyards, cattle and cotton. These farms are spread across different states and climates – good diversification.
Another way it's able to keep growing the distribution is thanks to productivity improvement investments at some of the farms. This lifts the rental income and farm value.
It also already guided for a 4% distribution increase in FY21. The forward distribution yield is 6%.
WAM Research Limited (ASX: WAX)
This is a listed investment company (LIC) which invests in the most promising small and medium growth businesses on the ASX.
It has been one of the best-performing LICs on the ASX thanks to the investment skills of the team at Wilson Asset Management. WAM Research normally has a portfolio of dozens of shares, so it's usually quite diverse at any point in time.
The LIC also likes to maintain quite a high level of cash for protection and opportunities.
It has grown its dividend every year since the GFC and it currently has a trailing grossed-up dividend yield of 11.7%. I think even a yield of 10% would be solid in this low interest environment.
APA Group (ASX: APA)
This is one of the largest infrastructure businesses on the ASX.
APA Group owns a vast network of 15,000km of natural gas pipelines around Australia with a presence in every mainland state and the Northern Territory. It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms). APA owns, or manages and operates, a portfolio of assets worth more than $21 billion and delivers half the nation's natural gas usage.
The great thing about APA is that it earns remarkably reliable and consistent cashflow because of the nature of its assets. Australians will continue to need gas, particularly as it's coming up to the colder months for some states and we're doing more home cooking.
It has been steadily increasing its distribution each year for around 15 years. APA currently offers an estimated distribution yield of 4.4%.
Foolish takeaway
If you're after a high yield then it's clear that WAM Research is the winner. Even if the coronavirus cause a material dividend cut, it would probably still have the largest yield.
I really like the long-term income prospects of Rural Funds with its long rental contracts, continuing productivity investments and the uncertainty of global food supply meeting demand in the coming decade.
