If you’re in retirement then you’ll no doubt be well aware of how difficult it has become to generate an income from term deposits and savings accounts.
Unfortunately, I suspect it could be many years before we see interest rates at levels that are sufficient to generate a liveable income from.
But don’t worry because there are a large number of shares on the ASX which I believe could be part of a successful retirement portfolio.
Two top dividend shares I think retirees ought to consider are listed below. Here’s why I like them:
Coles Group Ltd (ASX: COL)
I would argue that Coles is the best share for a retiree to own right now. This is due to its solid long term growth potential, generous dividend policy, and defensive qualities. The supermarket giant has displayed the latter this year with its strong sales growth during the pandemic. I’m not the only one that thinks Coles is a buy. A recent broker note out of Goldman Sachs reveals that it has Coles on its conviction buy list with an $18.60 price target. This implies potential upside of approximately 21% for its shares over the next 12 months. But just as good, the broker is forecasting a 65 cents per share fully franked dividend in FY 2021. This represents a 4.25% forward dividend yield.
Telstra Corporation Ltd (ASX: TLS)
Another top option for retirees to consider buying is Telstra. Like Coles, I think the telco giant has a lot of the qualities required for a spot in a retirement portfolio. It has defensive earnings, a generous dividend yield, and decent growth prospects. While the latter may be a couple of years away, I think Telstra could return to growth potentially as soon as 2022 when the NBN headwinds ease and its cost cutting takes full effect. In the meantime, I’m optimistic that its free cash flow will be sufficient to maintain its current dividend of 16 cents per share. Though, if a much-speculated cut to 14 cents per share is made in response to the pandemic, its shares will still provide an above-average yield. 16 cents per share equates to a fully franked 5.1% yield, whereas 14 cents per share would be a 4.5% yield.
And here is another top share which offers growth and income. It could be a perfect addition to a balanced portfolio…
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Edward has just named what he believes is the number one ASX dividend stock to buy for 2020.
This fully franked “under the radar” company is currently trading more than 24% below its all-time high and paying a 6.7% grossed-up dividend.
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But you will have to hurry — history has shown it can pay dividends to get in early to some of Edward’s stock picks, and this dividend stock is already on the move.
More reading
- Is the Bega Cheese share price a strong ASX buy today?
- Forget term deposits and buy these top ASX dividend shares
- 2 ASX shares I would buy for growth and income
- Latest ABS data reveals how Australians are responding to COVID-19
- Why Macquarie, Telstra, United Malt, & Westpac are dropping lower
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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