Insights

Could these 3 ASX dividend shares still beat the piggybank if rates hit 2.5%?

Which ASX dividend shares would still offer monster yields in a high interest rate world?
The post Could these 3 ASX dividend shares still beat the piggybank if rates hit 2.5%? appeared first on The Motley Fool Australia. –

Well, this week was a fairly momentous one. It saw our own central bank, the Reserve Bank of Australia (RBA), lift interest rates for the first time in 11 years. This has understandably caused some navel gazing for many ASX investors, who may have gotten used to the successive interest rate cuts the last decade has brought. Not to mention the record low cash rate of 0.1% that was in place for more than two years. Now the RBA has hiked rates from 0.1% to 0.35%.

But if what the RBA had to say on Tuesday proves prescient, it may not be the last interest rate rise we see in 2022. In fact, we are almost certainly going to see another hike soon, seeing as the RBA governor said, “the Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time. This will require a further lift in interest rates over the period ahead”.

Previously, the RBA has said that it sees interest rates at the “neutral” level of 2.5% in the future. So if that came to pass, could dividend shares still offer attractive yields?

If interest rates were to move to 2.5%, you could expect many ‘safe’ investments like savings accounts and term deposits to offer similar, if not slightly higher, rates of interest. That would be a big change from the present lay of the land, where it is still difficult to find a savings account with an interest rate above 1%.

So if rates did rise to 2.5%, would it still be worth chasing yield from ASX dividend shares?

3 ASX dividend shares that beat the piggybank

Well, here are three such shares that would still be the piggybank if rates did climb to 2.5%.

Coles Group Ltd (ASX: COL) is one such share. Coles has been ratcheting up its annual dividend for a few years now. 2019 saw this grocery giant fork out 35.5 cents per share in dividends. But last year had the company dole out 61 cents per share, fully franked of course. On current pricing, this gives Coles a trailing dividend yield of 3.31%. With the full franking, that grosses-up to 4.73%.

WAM Research Ltd (ASX: WAX) is another share that has a good chance of being a piggybank-beater in the years ahead. This Listed Investment Company (LIC) has been increasing its annual dividend for more than 10 years now. Last year saw WAM Research pay out 9.9 cents per share, a pleasing rise from 2011’s 6 cents per share. On current pricing, that gives this LIC a dividend yield of 6.12%, or 8.74% grossed-up with the company’s full franking.

Finally, there’s Telstra Corporation Ltd (ASX: TLS) to consider as well. Telstra has had a reputation as a strong dividend payer for years. The telco has kept its 16 cents per share annual dividend payment steady for a while now. Even so, this gives Telstra shares a yield of 4% as it currently stands. Telstra also typically does out full franking credits with its dividends, so that payment grosses-up to a current yield of 5.71%.

The post Could these 3 ASX dividend shares still beat the piggybank if rates hit 2.5%? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Telstra right now?

Before you consider Telstra, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Telstra wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

Here’s how the Woolworths share price stacked up in April
Here are the 3 most heavily traded ASX 200 shares on Wednesday
What’s the outlook for the Telstra share price in May?
Analysts name 2 blue chip ASX 200 dividend shares to buy
5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Sebastian Bowen has positions in Telstra Corporation Limited and WAM Research Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US & HK* Trades. Click Here!