Insights

Forget savings accounts and buy these ASX dividend shares instead

Here’s why I think Accent Group Ltd (ASX:AX1) and this ASX dividend share could be great options for income investors…
The post Forget savings accounts and buy these ASX dividend shares instead appeared first on Motley Fool Australia. –

dividend shares

At present, the base interest rates on savings accounts from Commonwealth Bank of Australia (ASX: CBA) and other banks are as low as 0.05%.

This means that even if you had $1 million dollars sitting in one of these accounts, you would only be receiving $5,000 of interest each year.

In light of this, I continue to believe savers would be better putting their money to work in the share market, rather than gaining such paltry interest.

Two dividend shares that I believe could offer both generous dividends and solid returns over the coming years are listed below. Here’s why I would buy them:

Accent Group Ltd (ASX: AX1)

I think Accent Group would be a great option for income investors. It is a footwear-focused retailer which owns retail store brands such as HYPE DC, Platypus, The Athlete’s Foot and Sneaker Lab. It also has a number of licensing agreements for the local market with footwear giants such as Skechers, Timberland, and Vans.

It has been thanks largely to its in-demand brands and its growing online business that Accent has continued its positive form in 2020 despite the pandemic. For example, in FY 2020, the company posted a 7.5% increase in net profit after tax to $58 million. Pleasingly, I believe there’s still a lot more to come from Accent over the coming years. This is due to its expansion plans, strong online presence, and its focus on active and casual wear.

I’m expecting the company to pay a 9 cents per share fully franked dividend in FY 2021. Based on the current Accent share price, this means investors will receive a 5.4% dividend yield.

National Storage REIT (ASX: NSR)

Another option I think income investors ought to consider buying is this self-storage operator. I believe National Storage could be a great long term pick due to its strong market position and growth through acquisition strategy in a highly fragmented industry.

As with Accent Group, National Storage was a positive performer in FY 2020 despite the disruption caused by the pandemic. It posted a 9% increase in underlying earnings to $67.7 million over the 12 months.

And while management has warned that its earnings could be flat in FY 2021, I expect it to rebound in FY 2022. Especially if the housing market bounces back as many are predicting. Housing activity is a key driver of demand for its services, so a booming market would only be good news for National Storage. This should be supported by its aforementioned growth through acquisition strategy and its exposure to the ecommerce market. In respect to the latter, a growing number of small businesses are using its WiFi-enabled storage units to run their online operations. 

I’m forecasting a 7.6 cents per share distribution in FY 2021. Based on the current National Storage share price, this represents a generous 4.2% yield.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia has recommended Accent Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Forget savings accounts and buy these ASX dividend shares instead appeared first on Motley Fool Australia.

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