Later this week the Reserve Bank of Australia is widely expected to cut the cash rate to a new record low of 0.1% or even 0%.
Unfortunately, I think it could be a long time until interest rates move higher from here, let alone back to normal levels again.
In light of this, I continue to believe that income investors would be better off sticking with dividend shares instead of term deposits or savings accounts.
But which dividend shares should you buy? Two top dividend shares I would buy are listed below. Here's why I like them in the current low interest rate environment:
Commonwealth Bank of Australia (ASX: CBA)
Rather than put money in its savings accounts, I think investors should be buying its shares. Although the pandemic is certainly hitting the bank hard, it is reassuring to see that the number of loans on deferral continue to reduce. I believe this is a sign that the provisions it has made will be sufficient.
In light of this and the relaxing of responsible lending rules, I believe Commonwealth Bank's outlook is improving greatly. So with its shares still down over 24% from their 52-week high, I think now could be an opportune time to invest with a long term view.
Finally, estimating what dividend the bank will pay in FY 2021 is difficult because of the pandemic. However, based on the current Commonwealth Bank share price, I would expect a fully franked yield in the region of 4% over the next 12 months.
National Storage REIT (ASX: NSR)
Another ASX dividend share I would buy is National Storage. It is a leading self-storage operator which I believe has a very positive long term growth outlook. This is thanks to its organic and inorganic growth opportunities. The latter is through its growth through acquisition strategy which has been very effective over the last few years.
Pleasingly, management has persisted with this strategy even during the pandemic. Last week at its annual general meeting, National Storage revealed that it has completed eight acquisitions totalling $139 million in FY 2021. Management also advised that its forward-looking acquisition pipeline remains strong.
Another positive from its annual general meeting was that its occupancy levels are increasing. It advised that in excess of 60,000 square metres of occupancy has been added since 1 July, which is the equivalent of 12 full centres.
Finally, management reaffirmed its underlying earnings per share guidance of 7.7 cents to 8.3 cents per security. Based on this, its dividend policy, and the latest National Storage share price, I estimate that its shares offer a 4.2% yield.
