Yesterday, the Reserve Bank again left rates on hold at a record-low 2%.
That means, once again, retirees and other investors relying on a stable income from their nest egg will be forced to either:
- Bite the bullet on a term deposit paying just 2%, which is barely enough to cover inflation; or
- Move further up the risk curve for higher returns.
Moving up the risk curve could mean an investment in property or shares.
Over the long pole, both asset classes have significantly outperformed other investments, including cash and fixed income.
5 retirement-ready dividend stocks
In contrast with the meagre 2% return from interest accounts, shares in some of the following reputable blue chip companies offer tax-effective yields over 5%.
- Wesfarmers Ltd (ASX: WES)
The $44 billion owner of Coles, Bunnings Warehouse, Kmart and much more can be considered a core holding in all investors’ portfolios. At today’s prices, its shares pay a fully franked dividend equivalent to a yield of 5%.
- Australia and New Zealand Banking Group (ASX: ANZ)
Australia’s fourth-largest retail bank, ANZ, has had a tough run in 2015. But with a Super Regional Strategy ongoing, and an engrained presence in Australia and New Zealand’s housing markets, the best days could be yet to come for ANZ shareholders. At today’s prices, its shares are forecast to pay a dividend of 6.5% fully franked.
- Westfield Corp Ltd (ASX: WFD)
Westfield Corp is the global arm of the Lowy family’s pride and joy: Westfield shopping centres. The company offers investors international exposure, a dividend of 3.4% and the opportunity to benefit from future expansions in its portfolio of centres.
- Telstra Corporation Ltd (ASX: TLS)
Telstra needs no introduction, but should be introduced to any high-yielding portfolio — if it hasn’t been already. Wide profit margins, dominant market share and an international expansion bode well for the sustainability of its 5.4% fully franked dividend.
- iShares S&P/ASX High Dividend Yield Index Fund (ASX: IHD)
Okay, this isn’t an individual dividend ‘stock’ idea, rather a group of dividend stocks held in a fund — in this instance, an ‘Exchange Traded Fund’ or ETF. Essentially, you invest in the ETF by buying it on market like you would a normal share, then iShares buys the equivalent amount of all shares in the ASX High Dividend Yield Index (currently 51 companies are in the fund). This offers you instant diversification and an estimated yield of 6.48%. iShares charges just 0.3% per annum as a management fee.
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Buying dividend stocks could be a great way to boost your retirement income.
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Motley Fool contributor Owen Raskiewicz has no position in any stocks mentioned.
Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Bruce Jackson.