The interest rate available from bank accounts is truly atrocious these days. It’s so low that retirees and first-home savers are looking at different assets like shares to boost their returns from their savings.
A bank account offering a 2.8% interest rate isn’t much use if you need to fund your retirement.
Shares could offer investors the income they need:
WAM Capital Limited (ASX: WAM)
WAM Capital is one of the largest listed investment companies (LICs) on the ASX and the biggest LIC run by Wilson Asset Management.
WAM Capital has strongly outperformed the market and its benchmark over the long-term, meaning that it has generated strong returns. The LIC pays out most of its profit each year as a growing dividend, which is why it could be such a good option for retirees.
It currently has a grossed-up dividend yield of 8.91%.
Clime Capital Limited (ASX: CAM)
Clime is a much smaller LIC than WAM Capital, but it could still be a good choice for income.
It has recently made steps to increase its value to shareholders. It has included an overseas investment strategy into its portfolio, meaning there are more investment opportunities and the portfolio is more diversified.
The other thing management did was convert its preference shares into ordinary shares, which was calculated to save around $900,000 in franked dividends per annum at the time of conversion.
Clime also has an aim of slowly increasing its dividend, which is handy when the grossed-up yield is quite high at 7.81%.
Challenger Ltd (ASX: CGF)
Challenger may not strike most investors as an option for retirees. However, consider that Challenger’s main clients who purchase annuities base are retirees.
Retirees could buy Challenger for its grossed-up dividend yield of 3.53% and also benefit from the growth of over-65s looking for a guaranteed source of income.
I expect that Challenger’s dividend will grow at a much faster pace over the next decade compared to Challenger’s CPI-linked annuities too.
All three could be good options today for a long-term buy. WAM Capital is probably the best choice for retirees because of how large its dividend yield is.
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Motley Fool contributor Tristan Harrison owns shares of Challenger Limited and WAM Capital Limited. The Motley Fool Australia owns shares of and has recommended Challenger Limited. 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.