Why I would buy Coles (ASX:COL) and this ASX dividend share

Here’s why I think income investors should buy Coles Group Ltd (ASX:COL) and this top ASX dividend share this month…
The post Why I would buy Coles (ASX:COL) and this ASX dividend share appeared first on Motley Fool Australia. –

Coles share price

If you’re struggling to generate a sufficient income by using term deposits, then I would suggest you consider switching to ASX dividend shares.

This is because there are a good number of companies on the Australian share market paying dividends that offer yields which are vastly superior to those on offer with term deposits.

But which ones should you buy? Here are two ASX dividend shares I would buy:

Coles Group Ltd (ASX: COL)

The first ASX dividend share to consider buying is this supermarket operator. I think it is a great share to own during the pandemic due to its defensive qualities and strong market position. It was thanks partly to these that Coles was able to deliver an impressive full year result last month. At a time when most other companies were reporting sharp profit declines, Coles reported strong sales and profit growth. It posted a 6.9% increase in sales to $37.4 billion and a 7.1% lift in net profit after tax to $951 million in FY 2020.

The good news is that Coles has started FY 2021 in a positive fashion and appears to be in a position to deliver another solid result next year. I expect this to allow the company to reward its shareholders with another generous dividend in FY 2021. Based on the current Coles share price, I estimate that it offers a forward fully franked 3.2% dividend yield.

National Storage REIT (ASX: NSR)

A second dividend share to consider buying is this self-storage operator. I like National Storage due to its strong market position and positive long term outlook thanks to its growth through acquisition strategy. It was this strategy that helped the company overcome the negative impact of the pandemic and deliver underlying earnings of $67.7 million in FY 2020. This was a 9% increase over the prior corresponding period.

And while the company’s earnings are likely to be flat at best in FY 2021, I’m confident that it will return to growth once the pandemic passes. For now, the company is forecasting earnings of 7.7 cents to 8.3 cents per share this year and a dividend pay out ratio of 90% to 100%. Based on the current National Storage share price, the middle of this range implies a 4.1% distribution 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 COLESGROUP DEF SET. 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 Why I would buy Coles (ASX:COL) and this ASX dividend share appeared first on Motley Fool Australia.

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