With interest rates at record lows and unlikely to improve any time soon, dividend shares look likely to remain the best way to generate a passive income in 2021.
The good news is that there are a large number of dividend shares offering generous yields. Two ASX dividend shares to look are listed below:
BHP Group Ltd (ASX: BHP)
BHP is one of the world's largest mining companies and the owner of many of the highest quality and lowest cost operations across the globe.
It looks well-placed to deliver a strong result in FY 2021 thanks to favourable copper and iron ore prices and a recovery in oil prices. Pleasingly, with its balance sheet looking extremely robust, the majority of its free cash flow looks set to end up in shareholders' hands.
One broker that is positive on its prospects is Macquarie. Its analysts have forecast a fully franked ~$3.85 per share dividend in FY 2021. Based on the current BHP share price, this represents a whopping 9% dividend yield.
Rural Funds Group (ASX: RFF)
A second dividend share to look at is Rural Funds. It is an agriculture-focused property group that owns a total of 61 properties across five agricultural sectors. These quality properties are leased to some of the biggest operators in the industry. This includes almond producer Select Harvests Limited (ASX: SHV) and global wine company Treasury Wine Estates Ltd (ASX: TWE).
One of the key attractions to the company for income investors is its long term leases, which have periodic rental increases built in. At the end of FY 2020, Rural Funds' weighted average lease expiry (WALE) stood at 10.9 years.
This gives management great visibility on its future earnings and has allowed it to provide guidance even during the pandemic. In FY 2021, Rural Funds intends to increase its distribution by 4% to 11.28 cents per share. Based on the latest Rural Funds share price, this equates to a 4.4% yield.
