Beat negative interest rates with these ASX dividend shares

The low interest rate environment hit a new low last week when the Federal Government was effectively paid to borrow money.

The government has just successfully undertaken a $1.5 billion traunch of three-month bonds with a negative interest rate of -0.01%.

Unfortunately for income investors, this appears to be a sign that it will be a long time until interest rates return to “normal” levels again.

But don’t worry, because there are plenty of dividend shares that offer investors generous yields.

Two to consider buying are listed below. Here’s why they are rated highly:

This mining giant has been tipped to reward its shareholders with some very generous dividends in the coming years. This is due to its world class operations, low costs, and favourable commodity prices. The latter is certainly the case for iron ore, which is trading north of US$150 a tonne at present.

Last week, Macquarie reiterated its outperform rating and $46.00 price target. The broker is also forecasting a ~$3.09 per share fully franked dividend in FY 2021. Based on the current BHP share price, this represents a 7.2% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

This telco giant has underperformed over the last few years after struggling with a massive earnings gap caused by the NBN rollout. The good news is that the NBN headwind is now easing and its outlook is becoming significantly more positive. Especially given its T22 strategy, which is cutting costs and simplifying its business. The latter could include splitting its business into three in an attempt to monetise some of its assets.

Analysts at UBS believe now is an opportune time to invest and have recently put a buy rating and $3.70 price target on its shares. They are also forecasting a 16 cents per share fully franked dividend for the foreseeable future. Based on the current Telstra share price, this means a fully franked 5.3% dividend yield.

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Returns As of 6th October 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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