Many Australians in the retirement phase will likely be cashed up and looking for liquid shares to do nothing other than provide a steady income to escape the insulting returns on cash and help them enjoy a comfortable retirement.
If you’re investing for income today you’re likely to want businesses returning at least 4 per cent before the benefits of franking credits. Of course the key is to find businesses on reasonable valuations with sustainable payouts as no one wants to see the value of their capital go down the drain, income, or no income.
Below I have four businesses I would buy if I were in the retirement phase and looking to generate income straightaway.
Magellan Financial Group Ltd (ASX: MFG) is the founder-led and fast-growing international equities manager that trades on a reasonable valuation and offers a trailing fully franked yield of 4.1%. I expect the group will be able to grow this payout over the medium term and it looks a sound investment for income seekers today.
Macquarie Group Ltd (ASX: MQG) is another diversified asset manager and investment bank that offers international exposure, an impressive track record of outperformance and a partly franked trailing yield of 4.9% when selling for $81.90. Expectations are that FY17’s dividend will be roughly in line with the prior year and it offers a classic mix of income and value.
Mirvac Group (ASX: MGR) is the residential property development and commercial property group with a heavy focus on the boom market of Sydney. It offers exposure to the strength of bricks-and-mortar as an asset class, a reasonable valuation, and trailing yield of 4.6%. Analysts’ forecasts are for the payout to grow at a healthy rate out to 2018.
Flexigroup Limited (ASX: FXL) is the consumer finance business on an attractive valuation around 10x trailing earnings with a bumper fully franked yield of 6.3%. You can’t ask for much better than that as an income seeker and I expect it will deliver healthy total returns from today’s share price of $2.21.
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Returns As of 6th October 2020
Motley Fool contributor Tom Richardson owns shares of Macquarie Group Limited and Magellan Financial Group.
You can find Tom on Twitter @tommyr345
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.
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