ASX dividend shares could be key for retirees to be able to fund their lifestyle in the future.
Assets like bonds and term deposits don’t offer much income any more. Official interest rates have been pushed very low.
I think ASX dividend shares can be the answer because they can generate bigger profits.
Here are three ideas to look into for income:
Rural Funds Group (ASX: RFF)
Rural Funds is a farmland real estate investment trust (REIT). It has a diverse farm portfolio including almonds, macadamias, cattle, cotton and vineyards.
There is always going to be demand for food, so Rural Funds should always be able to find a quality tenant for its farms. At the moment its weighted average lease expiry (WALE) is longer than 10 years right now, so there is a lot of income visibility as an ASX dividend share for retirees.
It only has large businesses as tenants like Select Harvests Limited (ASX: SHV), Treasury Wine Estates Ltd (ASX: TWE) and Olam.
Rental indexation is built into all of its contracts, which is linked to either a fixed 2.5% increase or CPI inflation, plus market reviews.
As an ASX dividend share for retirees it has a solid FY21 yield of 5.5%. The most attractive thing could be that management aim to increase the distribution by 4% every year.
Brickworks Limited (ASX: BKW)
Brickworks is a very reliable option for income in my opinion. It hasn’t decreased its dividend for over 40 years. There aren’t many ASX dividend shares that could claim to be as reliable as Brickworks.
There are three great divisions to Brickworks. It has a building products business that has been around for decades. It’s the leading brickmaker in Australia, but it also has other attractive businesses involved in roofing, precast, masonry and cement.
The building product division was recently expanded with acquisitions in the US. It’s now the market leader in the north east of the country.
It has a large holding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares, which is seen as one of the most reliable, durable businesses on the ASX. Soul Patts itself is a great ASX dividend share for retirees.
Finally, Brickworks has a stake in a growing industry property trust along with Goodman Group (ASX: GMG). It is steadily growing its net rental profit with more completed properties and steady rental growth.
Brickworks has a grossed-up dividend yield of 5.1%.
APA Group (ASX: APA)
The infrastructure giant has been one of the best ASX dividend shares for retirees this century. It has grown its dividend every year for the past decade and a half. Few shares on the ASX have a distribution growth record going back before the GFC.
It owns a vast network of 15,000km of natural gas pipelines around Australia with a presence in every mainland state and the Northern Territory. It also owns or has interests in gas storage facilities, gas-fired power stations and renewable energy generation (wind and solar farms). APA owns, or manages and operates, a portfolio of assets worth more than $21 billion and delivers half the nation’s natural gas usage.
The ASX dividend share funds its distribution purely from its cashflow each year, which is steadily growing as new projects come online. It currently has a FY20 distribution yield of 4.4%.
Foolish takeaway
For retirees, each of these ASX dividend shares have very reliable income prospects over the coming years. Their share prices are likely to move up and down quite a bit, but the dividends should be reliable. At the current prices I’d probably go for Brickworks first.
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More reading
- What ASX shares should you invest in during a bull market?
- Telstra shares and 2 other ASX companies to buy in a low-interest rate world
- Will the HomeBuilder stimulus boost ASX 200 building shares?
- Have $10,000? This is where I’d invest it into ASX shares
- 3 high yield ASX dividend shares to buy right now
Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, Treasury Wine Estates Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of APA Group. 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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