Most retirees are looking to maximise the income that they receive from the assets they own. For me, the only game in town to achieve good income is the share market.
However, when you’re in retirement you don’t want to be risking everything by investing in highly speculative shares. Instead, I think it’s possible to create a portfolio of quality shares that offer high performance, a certain defensiveness and good income.
With that in mind, these are two shares I’d be interested in:
Rural Funds Group (ASX: RFF)
Rural Funds is currently the ASX’s only real estate investment trust (REIT) that solely focuses on agricultural properties.
A lot of retirees have a pipedream of retiring onto a farm. Owning a small farm may not be the best financial decision, but owning shares of Rural Funds Group could be a good choice. It has a diversified portfolio of different farm types spread across different states and climactic conditions.
It aims to maintain a payout ratio of around 80%, which leaves plenty of cash to re-invest back into its properties to increase the capital and rental value.
The recent announcement of cattle feedlot acquisitions and capital raising will further improve the diversification of Rural Funds and will create a good working partner for the REIT in JBS.
(Edited:) To take part in the current capital raising you would have needed to buy shares before the trading halt on 11 July 2018, therefore any new purchasers of shares will not be able to take part in the offer.
WAM Research Limited (ASX: WAX)
This is one of my favourite listed investment companies (LICs) on the ASX. It’s run by Wilson Asset Management (WAM) and arguably it is perfectly set up for retirees.
Any fund manager can theoretically perform well, indeed WAM is one of highest-performing managers on the ASX every year. But very few fund managers have an investment vehicle like WAM Research that can pay out growing a fully franked dividend every year. The franking credits provide a large amount of additional returns for retiree shareholders.
WAM Research has increased its dividend every year since the GFC. It keeps a lot of cash on hand for protection against downside and also for opportunities when they appear. It has three years of profit reserves for the dividend at the current level.
It currently has a projected grossed-up dividend yield of 8.8%.
These two choices have an average yield of close to 7%, which is a strong yield. Both businesses intend to increase the income to shareholders over time. Plus, both are somewhat defensive. I think they’re good picks for a retiree’s portfolio.
Another share that could be an even better is this top share which would arguably do even better in a recession and it also just grew its dividend by 25%.
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Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and WAM Research Limited. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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.