With interest rates at record lows and likely to remain at these levels for some time, I believe the share market is the best place to earn a passive income.
But which ASX dividend shares should you buy? Here are two dividend shares I would pick up today:
Coles Group Ltd (ASX: COL)
The first ASX dividend share that I would consider buying is Coles. Since the supermarket giant was spun out of Wesfarmers Ltd (ASX: WES) back in 2018, it has been onwards and upwards for its shares. So much so, they recently reached a new record high. The good news is that I don't believe it is too late to invest.
I'm confident Coles can grow its earnings and dividend at a solid rate over the next decade thanks to its defensive earnings, refreshed strategy, expansion opportunities, and its focus on automation. In addition to this, recent lockdowns in Victoria look likely to give its sales a huge boost in the first quarter of FY 2021. Based on the current Coles share price, I estimate that its shares offer a fully franked 3.3% FY 2021 dividend.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
Another option for income investors to consider buying is the Vanguard Australian Shares High Yield ETF. This exchange traded fund has a focus on high yield shares and is invested in a total of 66 of them. I like this as it provides diversity, which has certainly proved to be as important as ever during the pandemic.
Among its holdings you will find the big four banks, BHP Group Ltd (ASX: BHP), Coles, and Telstra Corporation Ltd (ASX: TLS). At present, I estimate that the Vanguard Australian Shares High Yield ETF offers a FY 2021 dividend yield somewhere in the region of 4% to 5%.
