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. While term deposits offer capital protection and guaranteed income, they lack the potential for dividend yield growth and capital appreciation that stocks can provide.
Two ASX 200 shares, Telstra Group Ltd (ASX: TLS) and Scentre Group (ASX: SCG), stand out as particularly appealing options for investors seeking stable and growing returns.
Telstra Group Ltd: A Telecommunications Giant
Telstra Group Ltd, Australia’s leading telecommunications company, boasts significant competitive advantages, including the widest network coverage, superior spectrum assets, and a large subscriber base. These factors contribute to its defensive earnings, as internet connectivity remains a priority for households and businesses alike.
Telstra’s market dominance in both NBN and mobile connections provides it with substantial operating leverage. This means that as its subscriber base grows, the company can spread costs across more users, resulting in a strong profit margin. The ongoing digitalisation of the Australian economy further enhances Telstra’s growth prospects, particularly in terms of subscriber numbers and average revenue per user (ARPU).
In FY25, Telstra’s mobile division reported income growth of 3% to $11 billion and operating profit (EBITDA) growth of 5% to $5.3 billion. This contributed to a 3.2% increase in earnings per share (EPS) to 19.1 cents, supporting a 5.6% rise in the dividend per share to 19 cents.
Looking ahead, there is a strong likelihood that Telstra will increase its annual dividend per share to approximately 20 cents in FY26. At current levels, this represents a forward grossed-up dividend yield of 5.9%, inclusive of franking credits.
Scentre Group: The Power of Retail Real Estate
Scentre Group, the owner of Westfield shopping centres across Australia and New Zealand, offers another compelling investment opportunity. Despite the challenges faced by the retail sector, rental income from these properties is considered defensive and predictable. Many retailers rely on physical store space to conduct business, ensuring a steady demand for Scentre’s properties.
Moreover, the scarcity of available real estate for new large shopping centres near existing Westfield locations reduces competitive pressures. While online shopping presents a challenge, the rise of click-and-collect services still necessitates physical store presence. Additionally, Scentre can diversify its leasing strategy by offering space for non-retail activities such as food, entertainment, and education.
As of November 2025, customer visitation across Scentre’s portfolio reached 453 million, marking a 3.1% year-over-year increase. Total business partner sales for the year ending 30 September 2025 were $29.5 billion, up $760 million, with specialty sales growth at 4.4%.
These strong sales figures indicate that Scentre’s rental income is likely to continue growing. The company reported an average specialty rent escalation of 4.4% for the nine months ending 30 September 2025, with portfolio occupancy at a robust 99.8%, up 40 basis points from the previous year.
Scentre Group anticipates a 3% increase in its 2025 distribution to 17.72 cents per security, equating to a distribution yield of 4.4% at current prices.
Comparing ASX Shares to Term Deposits
The preference for ASX 200 shares over term deposits can be attributed to several factors. While term deposits offer security and fixed returns, they often lag behind inflation and lack growth potential. In contrast, shares like Telstra and Scentre provide opportunities for both capital appreciation and dividend growth, making them attractive for long-term investors seeking to build wealth.
Investing in stocks, however, does come with risks, including market volatility and potential capital loss. Therefore, investors must carefully assess their risk tolerance and investment goals before making decisions.
The Road Ahead
As the Australian economy continues to evolve, the potential for growth in sectors like telecommunications and retail real estate remains promising. Telstra and Scentre Group, with their strong market positions and growth strategies, are well-positioned to deliver attractive returns to investors.
For those seeking to diversify their portfolios and achieve higher returns than traditional term deposits, these ASX 200 shares offer compelling opportunities. As always, investors should conduct thorough research and consider consulting financial advisors to align their investments with their financial goals.
