If you’re aiming to retire rich, then the Australian share market could be the place to do it.

But how would you go about achieving this goal? One way could be to search for dividend-paying ASX shares to buy and hold for the long term.

That’s because if you can find ASX shares that have the potential to increase their dividends each year, by the time it comes to retirement, you could be getting some very big dividend payments.

Growing dividends

A good example of this is Treasury Wine Estates Ltd (ASX: TWE). Over the last 12 months, the wine giant has paid out fully franked dividends totalling 34 cents per share. While this only offers a 2.5% dividend yield if you buy its shares today, it is a very different situation for longer-term shareholders.

If you had bought Treasury Wine shares a little over a decade ago when they were trading at $3.11, you would be receiving a yield on cost of 10.9%.

This means that a $50,000 investment back then would be providing you with an income of approximately $5,500 now. Whereas if you invested $50,000 at today’s price you would only receive $1,250 in dividends.

And let’s not forget the capital gains! Despite some tough times in recent years, the wine giant’s shares have generated strong returns for investors over the last decade. This means that your $50,000 investment would have grown to become almost $220,000 today.

So, not only are you getting a very welcome paycheck each year, but you’re also sitting on a sizeable portfolio.

Switch to income?

The latter provides investors with a couple of options. One is that they can keep doing what they’re doing and let compounding work its magic. The other is switching your portfolio to a focus on income.

For example, according to a note out of Goldman Sachs, its analysts expect a $1.47 per share dividend from Westpac Banking Corp (ASX: WBC) this year. This equates to a 6.65% fully franked dividend yield at current prices.

If investors were to put that $220,000 into this big four bank’s shares, they would boost their income to almost $15,000. And with Goldman then expecting Westpac to increase its dividend to $1.56 per share in FY 2024, another paycheck worth $15,500 potentially awaits a year later.

That’s $30,000 in dividends from an original $50,000 investment in under 15 years.

And while past performance is no guarantee of future returns, Treasury Wine’s returns are largely in line with historical market averages. So, it certainly is achievable for investors if they can identify the right ASX shares to buy.

The post How I would invest in ASX shares to retire rich appeared first on The Motley Fool Australia.

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• Buy Westpac and this high-yield ASX dividend share: analysts
• 3 ASX 200 shares trading ex-dividend on Friday
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• Top ASX dividend shares to buy in March 2023

Motley Fool contributor James Mickleboro has positions in Westpac Banking. 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 recommended Treasury Wine Estates and Westpac Banking. 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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