3 shares for a blue chip retirement

One of the last things you want to be worrying about in retirement is if your next investment payment is going to be significantly lower than last year’s. That’s what happened to shareholders of Telstra Corporation Ltd (ASX: TLS) when the telco giant reduced its annual dividend per share payment from 30 cents per share to 22 cents. I don’t know about you, but a reduction of income of 25% would be a big blow to my finances.

Investors have been drawn to riskier shares to find better returns, but I don’t think they need to necessarily do that. Here are three shares that could offer solid returns for a blue-chip retirement:

Rural Funds Group (ASX: RFF)

Rural Funds Group is Australia’s only purely-agricultural real estate investment trust (REIT). People don’t want to bet the figurative farm on things, so why not invest in an actual farm business?

It owns a variety of farm types like almonds, macadamias, cattle, vineyards, poultry and cotton. I like that it has a diverse set of farms that are spread across different regions and climates.

Management have a long-term goal of increasing the distribution by 4% each year, which it has achieved so far.

Rural Funds is currently trading with a distribution yield of 4.67%.

WAM Leaders Ltd (ASX: WLE)

WAM Leaders is one of the larger WAM LICs, except this one focuses just on the big end of the Australian market. However, it doesn’t invest just like the Australian index. Its top holdings are shares like BHP Billiton Limited (ASX: BHP), Boral Limited (ASX: BLD), Commonwealth Bank of Australia (ASX: CBA), Computershare Limited (ASX: CPU) and CSL Limited (ASX: CSL).

By avoiding the small cap area of the market WAM Leaders may have a less volatile share price over time compared to its peers. But, volatility isn’t necessarily a bad thing.

WAM Leaders is currently trading with an expected grossed-up dividend yield of 6.38% for FY18.

Challenger Ltd (ASX: CGF)

Many retirees go for an annuity to provide for their retirement. However, a better idea could be just to buy the market-leading provider of annuities, Challenger.

Demand for annuities should continue to grow regardless of what the economy is doing. People will continue to enter retirement and may be even more inclined to buy an annuity if they are scared of the share market.

The number of retirees is on course to grow by 75% over the next two decades, which could mean a big increase of demand for Challenger’s products.

Challenger is currently trading with a grossed-up dividend yield of 4.6%.

Foolish takeaway

I like the idea of all three shares for retirement, which is why Rural Funds and Challenger are already a part of my portfolio. Rural Funds is trading at a significant premium to its underlying NTA, so it wouldn’t make a good value buy today. However, I think Challenger looks like an attractive long-term buy at the current price.

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Motley Fool contributor Tristan Harrison owns shares of Challenger Limited and RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended Challenger Limited, RURALFUNDS STAPLED, and Telstra Limited. The Motley Fool Australia has recommended Computershare. 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 Scott Phillips.

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