3 great shares to buy and hold for your retirement

Retirement can be a tough time for those who are unprepared – the transition from steady work, a regular income and a sense of purpose afforded through employment can be challenging. All of a sudden retirees can find that they have a lot of time on their hands. What’s a person to do? Buy a sports car? Travel the world? Volunteer?

In any event, that’s a good problem to have, one that’s easily solved. One problem you do not want to have in retirement is wondering where your next meal is coming from. Treasurer Joe Hockey has been banging the drum recently about how ‘the age of entitlement has ended’. While this in no way means that the pension tap will suddenly be turned off, those who aren’t facing retirement for 30-40 years (like myself) suspect that it will dry up somewhere along the way.

For individuals who are facing a self-funded retirement a little sooner (within 10-15 years), I have picked three shares across different price ranges that I think are the very highest quality shares on the ASX at the moment. The bluest of blue chips, all three are in the ASX 50 and all pay dividends.

1. Macquarie Group (ASX: MQG), currently trading around $56

Macquarie has reported positive earnings for the last 40 years (!), through all the economic peaks and troughs. Macquarie has also seen impressive price growth of 72% over the past 10 years. Past performance is no indication of future performance of course, but its record is impressive.

Macquarie also has solid growth in its annuities business and looks set to benefit from an increase in economic activity in its other divisions, which should see consistent earnings growth over the coming years. It has recently divested Sydney Airport (ASX: SYD) and consolidated its shares, freeing up a lot of capital that would otherwise have been used for a share buyback. The investment bank pays a consistent (95%) dividend of 4.2% at today’s prices with 40% franking. Fellow Fool writer Tim McArthur is also pro-Macquarie.

2. Woolworths (ASX: WOW), currently trading around $36.50

Everybody should know Woolworths. The most growth-oriented share of these three, Woolworths has an impressive 10-year price growth of 207%. Even with that in mind, it still seems fairly valued at today’s price (quite cheap I think, given its prospects for growth). Groceries and beverages provide by far the largest contribution to Woolies’ bottom line, with hardware beginning to make a contribution and petrol paying very little. Its Master’s hardware chain and acquisition of Quantium (a data-mining company) look set to deliver excellent growth over the coming years. Given its growth prospects and dividend of 3.8% (100% franked) at today’s prices, Woolworth’s is a share for every investor. Those after more information can check out “A stock picker’s guide to Woolworths“.

3. Amcor (ASX: AMC), currently trading around $10.70

Amcor is a global packaging manufacturer in segments including flexible packaging, rigid plastics, and packing distribution. Recent restructuring and a demerger made solid contributions to 2013 earnings, and expansion into developing markets looks to be the secret to future growth.

Business in developed markets is basically stable, though thankfully Amcor has a foothold in China; which is a nation in which I expect to see an explosion of consumerism as its middle class develops over the next 30-50 years. If Amcor is able to expand its businesses there to reap exposure to such growth I expect it to be sitting quite pretty over the coming decades.

Morningstar rates Amcor as having a narrow advantage over its competition, though believes it is also in the perfect position to maintain such an advantage. Morningstar also believes Amcor is 15% overpriced, valuing it at $9, though I would point out that often investors have to pay a premium for owning the highest-quality shares, of which this is one. Amcor pays an unfranked dividend of 3.8% at today’s prices. Amcor also has had price growth of ~40% over the last 10 years (the lowest of these three shares) thanks to the GFC. It has however grown 172% in the last five years. More information can be found in Tim McArthur’s “A stock picker’s guide to Amcor“.

3 high-yielding shares to add to your portfolio today

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Motley Fool contributor Sean O’Neill doesn’t own shares in any company listed. 

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