Why I would buy Telstra (ASX:TLS) and this ASX dividend share

Why I think income investors should buy Telstra Corporation Ltd (ASX:TLS) and this ASX dividend share this week…
The post Why I would buy Telstra (ASX:TLS) and this ASX dividend share appeared first on Motley Fool Australia. –

Telstra share price

Investors that are looking to add some quality dividend shares to their portfolio this week might want to consider the ones listed below.

I believe these two ASX dividend shares are among the best on offer on the Australian share market right now. Here’s why I would buy them:

Rural Funds Group (ASX: RFF)

I think this agriculture-focused property group would be a great option for income investors. I believe Rural Funds is well-positioned to grow its distribution at a solid rate over the 2020s. This is because of its high quality portfolio of assets spread across several different industries and their very long leases. In respect to the latter, Rural Funds currently has a weighted average lease expiry of almost 11 years. It also has rental increases built into these contracts.

I expect this to allow the company to deliver on its target of increasing its distribution by 4% per annum over the long term. This certainly looks to be the case in FY 2021, with management intending to increase its distribution to 11.28 cents per share. Based on the latest Rural Funds share price, this equates to a 4.9% yield.

Telstra Corporation Ltd (ASX: TLS)

Another ASX dividend share I would buy is Telstra. After a decade of disappointment, I’m confident that the 2020s will be a lot more positive. This is thanks to some major changes that are happening at the company right now with its T22 strategy. This is stripping out costs, making it more efficient, and simplifying its business.

But perhaps best of all, is that the end of the NBN rollout is now in sight. When this headwind finally ends, I expect Telstra to return to growth again. Until then, I’m optimistic that the company will be able to sustain its dividend if it changes its policy to a free cash flow based one. Based on this and the current Telstra share price, this would mean a very generous fully franked 5.6% dividend 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 RURALFUNDS STAPLED and Telstra Limited. 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 Telstra (ASX:TLS) and this ASX dividend share appeared first on Motley Fool Australia.

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