If you want your investments to support a happy retirement, you’ll want to find a few stocks that are both reliable performers, and capable of supplying a steady stream of dividends for you to spend. I’ve therefore tried to come up with a selection of sturdy stocks that proffer a dividend yield which is either growing or already puts a bank account to shame.
Many investors will want to buy one of the big banks. I think over the long term Westpac Banking Corp (ASX: WBC) will be the star performer of the big four as it begins to build up its wealth management arm. It also has the least exposure to fossil fuel assets that risk being stranded in the long term and minimal overseas exposure. I’d argue its the conservative choice, even if it is a bit too expensive for my liking. The trailing yield is 5.2% fully franked, and the dividend is expected to grow.
Up around 20% from December 2013 lows, BWP Trust (ASX: BWP) has been a solid long-term performer. The company makes the vast majority of its money by leasing property to Bunnings. Bunnings is Australia’s number one hardware store, so the trust’s main tenant is a reliable payer. Indeed Bunnings owner Wesfarmers Ltd (ASX: WES) owns well over 20% of BWP trust, and I expect it to yield at least 5% based on current pricing. Gearing sits around 20%, so its not debt free but not too risky either – it is less leveraged than many homes.
Cochlear Limited (ASX: COH) is another reliable dividend stock, and as the manufacturer of the world’s best hearing aids it will experience strong demand for its products as Western populations age. Its trailing yield is 4.2%, although the dividend may drop if earnings don’t rise in the near future (the payout ratio sits above 100%). In the long term, Cochlear should be a reliable earner.
Webjet Limited (ASX: WEB) is another one to look at. The online travel agent has been sold down due to concerns about competition selling flights and hotels online. At these prices, there is probably more upside than downside potential, especially as the key brand – Webjet – is highly trusted. In Australia, at least, the company has a modicum of pricing power and it trades on a trailing yield of 5% – also likely to grow.
1300 Smiles Limited (ASX: ONT) continues to grow and is fast catching up with elevated expectations. The company owns and manages dental practices in three states, though mostly in Queensland. There can be no doubt that shares are expensive, but despite the high expectations the company still yields 2.7%. What 1300 Smiles offers is peace of mind – not only is it one of the most socially responsible companies in Australia, but it is conservatively managed yet capable of seizing opportunities when they arise. Don’t expect the share price to take off, but do expect slowly growing dividends for the rest of your life.
Finally, retirees will want to make sure they have at least one stock that benefits from economic meltdowns, and I humbly suggest Bentham IMF Limited (ASX: IMF) for your consideration. The company funds litigation, so it benefits when others lose money. It currently yields 3.9% and although the dividend is not very steady the business is particularly resilient.
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Motley Fool contributor Claude Walker (@claudedwalker) owns shares in 1300 Smiles and Bentham IMF.