The Reserve Bank of Australia (RBA) has cut interest rates again, which makes it very hard for retirees to make the necessary returns from their money. ASX shares could be the answer.
Money in the bank is essentially risk-free, so we can be rewarded with a better return by taking risks.
You can certainly go for businesses which are seen as more defensive, you don’t want much risk of your business going bust. That’s why investors are attracted to the idea of shares like Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD).
But there’s another risk: valuation. It can be very easy to overpay for a business and then suffer a share price decline. If you have your eye on certain shares, it might be better to wait until they’re better value.
So here are three shares I think look good value, with good yields, which are more defensive than any particular ASX share:
Washington H. Soul Pattinson And Co. Ltd (ASX: SOL)
WHSP may be one of the most conservative ideas on the ASX, it’s an investment house that’s been operating for over a century. It hasn’t ever missed paying a dividend in its entire history, it doesn’t issue new shares and it doesn’t use debt to make investments.
The management team of WHSP try to be value focused and choose shares that don’t have much correlation to the normal returns of the share market. That’s why it owns shares like TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW) and New Hope Corporation Limited (ASX: NHC).
It has a long term record of outperforming the Australian index and it has increased its dividend each year since 2000, which is one of the best records on the ASX.
WHSP has a fully franked dividend yield of 2.7%.
Vitalharvest Freehold Trust (ASX: VTH)
Real estate investment trusts (REITs) are heavily in favour at the moment with investors looking for a regular source of cashflow, which commercial rental returns could provide. But I think plenty of REITs are trading too expensive, with the potential for oversupply in office and retail (and online could disrupt retail too).
Vitalharvest owns and leases out berry and citrus farms which it earnings an 8% rent and gets 25% of the underlying earnings too from the farms.
The past year of distributions, which only accounted for 11 months of earnings, amounts to a distribution yield of 6.25%.
BetaShares Australia 200 ETF (ASX: A200)
Another option could be just to buy a cheap ASX based exchange-traded fund (ETF) like the one I named which has a very cheap fee of 0.07% per year.
It owns all of Australia’s large blue chips, so it can pass through a lot of attractive dividend income. That’s why BetaShares states the underlying ETF has a partially franked dividend yield of 4.56%.
Buying an ETF could be the way to get a diversified approach to dividends from the ASX.
Summary
Out of the three options I’d rather buy WHSP shares because its dividend payments to shareholders are growing every year, which is very attractive for financial security.
There are more dividend shares out there, such as the ones revealed for free in the report below.
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Disclosure: Jaz owns shares of WHSP and Vitalharvest at the time of writing, but this could change at any time.
