Almost ready to retire? I’d buy cheap ASX dividend shares for passive income

It’s been a rough year for markets worldwide, and while the ASX has held up better than others, the downturn has likely left plenty of quality dividend shares trading for cheap prices. That’s good news for those looking to build passive income.

Of course, as with any investment, there are risks involved with holding shares.

But if I was about to retire, I’d be hunting for cheap ASX shares offering dividends right now.

Why I would invest in cheap ASX dividend shares for retirement

Investing in ASX dividend shares is a relatively reliable way to build a passive income, particularly if they can be found in the bargain bin.

Finding value ASX shares that also pay dividends can sometimes be a hard ask. However, they can provide both capital and dividend returns for a comparatively low initial investment when they are found.

Most ASX dividend shares pay shareholders twice a year, though some provide quarterly offerings.

Dividends generally represent a portion of a company’s profits for a particular period. Thus, they tend to grow alongside a business.

That means dividend shares can be a hedge against inflation.

It also means that, if I were about to retire, I would want to buy shares in companies that not only pay dividends, but also have plenty of room to grow.

That way, I could sit back and enjoy receiving regular payouts without worrying about actively managing my portfolio.

Here’s how I would search for cheap ASX dividend shares to help fund my lifestyle in retirement.

How I would seek out value dividend stocks

I would start by searching for cheap ASX dividend shares in sectors known to be undervalued that also boast clear future growth prospects.

From there, it would be wise to consider which shares I truly believe represent quality businesses.

Whether a business is ‘good quality’ is very subjective. However, quality companies generally boast strong balance sheets, a competitive edge, and a loyal customer base. That way, they’re likely to make the most of the good times and push through tough times.

I would also focus on de-risking my portfolio as much as possible. And by de-risking, I mean diversifying. Diversification is one of the most reliable ways to protect a portfolio from downturns in individual sectors or companies.

Finally, I would look for shares paying consistent dividends with sustainable yields.

Investing in cheap ASX dividend shares for retirement often means buying shares to hold for many years and decades. Therefore, it’s likely a green flag if a company has been paying decent dividends for years or decades gone by.

Additionally, while it might be tempting to buy shares with gigantic dividend yields, it’s worth remembering that such yields are hard to sustain in the long term.

The post Almost ready to retire? I’d buy cheap ASX dividend shares for passive income appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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