With interest rates at record lows and unlikely to go higher for some time, it is increasingly difficult for income investors to earn a sufficient income from traditional interest-bearing assets.
Fortunately, the Australian share market has come to the rescue with a large number of dividend shares offering generous yields.
Two ASX dividend shares with above-average yields are listed below:
BWP Trust (ASX: BWP)
BWP Trust is the owner of 68 Bunnings Warehouse sites across Australia. Thanks to the strength of the Bunnings business, BWP has been able to collect its rent largely as normal during the pandemic. This, combined with an increase in the fair value of its assets, led to the company reporting a 24.4% increase in full year profit to $210.6 million in FY 2020.
It was thanks to this positive form that the BWP board was able to increase its distribution to 18.29 cents per unit. Based on the current BWP share price, this represents a trailing 4.2% yield for investors. Management advised that a similar dividend is expected in FY 2021.
Fortescue Metals Group Limited (ASX: FMG)
Fortescue is one of the world's leading iron ore producers. Over the last few years the company has generated staggering returns for investors. This has been driven by significant cost reductions, an increase in its grades, production growth, and favourable iron ore prices.
The good news for Fortescue and its shareholders is that the iron ore price climbed well beyond US$130 a tonne and to its highest level since 2013 last week. This compares to Fortescue's current C1 costs of US$12.74 per wet metric tonne.
Given the margins the company is operating with and its strong balance sheet, Fortescue is being tipped to reward shareholders with bumper dividends in FY 2021. Macquarie, for example, is forecasting a fully franked $1.64 per share dividend over the next 12 months. Based on the current Fortescue share price, this equates to a sizeable 8% dividend yield.
