The S&P/ASX 200 Index (ASX: XJO) shares are increasingly seen as a more attractive option for passive income compared to traditional term deposits. This shift in preference is driven by several factors, including higher potential dividend yields, growth in payouts, and the prospect of capital appreciation. While term deposits offer the security of guaranteed income, they lack the potential for additional returns beyond capital protection.
Some businesses within the ASX 200 are capable of delivering stable and growing earnings, providing a dual advantage of dividend and share price growth. Among these, Telstra Group Ltd and Scentre Group stand out as compelling choices for investors seeking reliable income streams.
Telstra Group Ltd: A Telecommunications Powerhouse
Telstra Group Ltd (ASX: TLS) is recognized as Australia’s leading telecommunications company, boasting significant competitive advantages. With the widest network coverage, premier spectrum assets, and the largest subscriber base, Telstra is well-positioned in the market. Its earnings are considered defensive, as internet connectivity remains a priority for households, businesses, and organizations alike.
Telstra’s substantial market share in both NBN and mobile connections provides it with advantageous operating leverage. As the subscriber base grows, the company can distribute costs more effectively, enhancing its profit margins. The consistent increase in subscribers and average revenue per user (ARPU) contributes positively to Telstra’s financial performance.
The Telstra mobile division reported a 3% income growth to $11 billion, with operating profit (EBITDA) rising by 5% to $5.3 billion in FY25. This led to a 3.2% increase in earnings per share (EPS) to 19.1 cents and supported a 5.6% increase in the dividend per share to 19 cents.
Looking ahead, there is optimism that Telstra will further increase its annual dividend per share to approximately 20 cents in FY26. At current levels, this would equate to a forward grossed-up dividend yield of 5.9%, factoring in franking credits.
Scentre Group: Dominating Retail Space
Scentre Group (ASX: SCG), the owner of Westfield shopping centres across Australia and New Zealand, presents another attractive ASX 200 share. While the retail sector faces challenges, rental income from these centres is viewed as defensive and predictable. Retailers leasing space in Westfield centres rely on physical locations to conduct business, underscoring the necessity of these spaces.
The scarcity of available real estate for new shopping centres near existing Westfield locations minimizes competition. Although online shopping poses a challenge, the demand for physical stores persists, particularly for click-and-collect services. Scentre Group also explores leasing excess space for non-retail purposes, such as food, entertainment, and education, to diversify its income streams.
In its November update, Scentre Group reported customer visitation of 453 million for the 45 weeks to 9 November 2025, a 3.1% increase year over year. Total business partner sales reached $29.5 billion, up $760 million, with specialty sales rising by 4.4%.
These figures indicate robust sales performance, suggesting continued growth in rental income. The reported average specialty rent escalation of 4.4% in the nine months to 30 September 2025, along with a high portfolio occupancy of 99.8%, reinforces this outlook.
Scentre Group anticipates a 3% increase in its 2025 distribution to 17.72 cents per security, translating into a distribution yield of 4.4% at current levels.
Implications for Investors
The preference for ASX 200 shares over term deposits reflects a broader trend among investors seeking higher returns in a low-interest-rate environment. While term deposits offer safety, the potential for dividend growth and capital appreciation makes shares like Telstra and Scentre Group appealing for those willing to embrace some risk.
As the Australian economy continues to digitalize and consumer behaviors evolve, companies with strong market positions and adaptive strategies are likely to thrive. For investors, this means opportunities to benefit from both income and growth, making ASX 200 shares a compelling alternative to traditional savings vehicles.
In conclusion, while term deposits remain a staple for risk-averse investors, the dynamic nature of the stock market offers potential rewards that are hard to ignore. As always, investors should consider their risk tolerance and financial goals when making investment decisions.
