The allure of the S&P/ASX 200 Index (ASX: XJO) shares as a source of passive income is gaining traction, potentially overshadowing traditional term deposits. This shift is driven by the promise of higher dividend yields, payout growth, and the potential for capital appreciation that stocks can offer. In contrast, term deposits, while providing capital protection, are limited to the guaranteed income they generate.
Two standout ASX 200 shares, Telstra Group Ltd (ASX: TLS) and Scentre Group (ASX: SCG), are emerging as attractive options for investors seeking stable and growing earnings, which in turn fuel both dividend and share price growth.
Telstra Group Ltd: A Telecommunications Titan
Telstra, the leading telecommunications provider in Australia, boasts significant competitive advantages. Its extensive network coverage, superior spectrum assets, and substantial subscriber base position it as a formidable player in the market. The company’s earnings are perceived as defensive, given the essential nature of internet connectivity for households and businesses alike.
With a dominant market share in both NBN and mobile connections, Telstra benefits from operational leverage. This means the more subscribers it acquires, the more efficiently it can distribute costs, bolstering its profit margins. The consistent growth in subscriber numbers and average revenue per user (ARPU) continues to enhance the company’s financial performance.
Recent financial results underscore Telstra’s robust growth trajectory. The mobile division reported a 3% increase in income to $11 billion, while operating profit (EBITDA) rose by 5% to $5.3 billion in FY25. This contributed to a 3.2% climb in earnings per share (EPS) to 19.1 cents, supporting a 5.6% rise in the dividend per share to 19 cents.
“There’s a strong likelihood that Telstra will increase its annual dividend per share to approximately 20 cents in FY26, translating to a forward grossed-up dividend yield of 5.9%, inclusive of franking credits.”
Scentre Group: The Power of Retail Real Estate
Scentre Group, the proprietor of Westfield shopping centres across Australia and New Zealand, presents another compelling case for investors. While retail faces challenges, rental income from these centres is seen as both defensive and predictable. Retailers leasing space in Westfield centres rely on physical locations to conduct business, ensuring a steady demand for Scentre’s properties.
The scarcity of available real estate for new large shopping centres near existing Westfield locations further solidifies Scentre’s competitive position. Although online shopping poses a challenge, the necessity for physical stores in click-and-collect models maintains the relevance of these centres. Additionally, Scentre is exploring leasing options for non-retail activities, such as food, entertainment, and education, to diversify its income streams.
Recent updates from Scentre highlight its resilience. For the 45 weeks ending 9 November 2025, customer visitation reached 453 million, marking a 3.1% increase year over year. Total annual business partner sales across its portfolio amounted to $29.5 billion, up by $760 million, with specialty sales growing by 4.4%.
“Scentre’s portfolio occupancy is impressively high at 99.8%, an increase of 40 basis points from the previous year. The company anticipates a 3% growth in its 2025 distribution to 17.72 cents per security, equating to a distribution yield of 4.4%.”
Comparing ASX 200 Shares and Term Deposits
The preference for ASX 200 shares over term deposits is not without reason. While term deposits offer security and guaranteed returns, they lack the growth potential inherent in equities. Investors seeking to maximize their passive income might find the higher yields and growth prospects of stocks like Telstra and Scentre more appealing.
Historically, equities have outperformed fixed income investments over the long term, providing both dividend income and capital appreciation. The current economic climate, characterized by low interest rates, further diminishes the attractiveness of term deposits, making dividend-paying stocks an increasingly viable alternative.
Looking Ahead
The decision to invest in ASX 200 shares or term deposits ultimately hinges on individual financial goals and risk tolerance. However, the potential for higher returns through dividend growth and capital gains makes stocks like Telstra and Scentre compelling options for those willing to embrace a bit more risk in pursuit of greater rewards.
As the market evolves, investors will continue to weigh the benefits of equities against the safety of term deposits. For now, the promise of attractive yields and growth opportunities positions ASX 200 shares as a noteworthy consideration for passive income seekers.
