If you're planning on retirement in the next 10 years or so, now is a good time to stock up on companies that will keep the coffers full with their lucrative dividend payments.
Since you're not relying on the dividend income just yet, you also have an opportunity to identify companies that are still growing now, but are expected to transition to larger dividend payments over time. Here are 3 companies I would buy now if I was retiring in 10 years:
Vocus Group Ltd (ASX: VOC)
This telecom company is currently still investing heavily in laying new growth fibre, and pays a mediocre dividend. However, with the tailwinds from surging data demand and the defensive characteristics of customers that rely on the internet every day, Vocus Communications is a solid purchase now for investors that are retiring in a decade's time.
Vocus currently has modest debt, a modest price, modest growth prospects, and a modest dividend. Once the company's growth expenditure slows down, it is expected to pay much higher dividends as a percentage of profits and this is exactly what you'll want when you're retired.
Sydney Airport Holdings Limited (ASX: SYD)
Sydney Airport looks a little expensive to me right now. However, by taking a 10-year time frame, investors can get the pricing decision wrong and still achieve respectable returns over the long run, as well as an attractive income stream in retirement.
As the only major airport in Sydney and with an option over the second airport at Badgery's Creek, Sydney Airport runs an effective monopoly that generates oodles of cash for shareholders. The modest growth passenger numbers is not expected to abate any time soon, and the airport is expected to serve a significantly greater number of annual passengers in 10 years.
Class Ltd (ASX: CL1)
An unusual suggestion, Class is a small but growing software company well outside the list of 'usual suspects' for retirement portfolios – it pays just a 1.4% dividend. However, the company's management software for superannuation funds is critical to the success of Self-Managed Super Fund (SMSF) operators and should result in sticky clients and recurring cash flows.
Class could potentially become meaningfully larger over the next decade as the SMSF industry grows, and high profit margins (think: bigger dividends) and growing dividends could prove a boon to a would-be comfortable retiree.
