How to retire rich with these 3 blue-chip growth and income shares

Sydney Airport Holdings Pty Ltd (ASX:SYD) and ASX Ltd (ASX:ASX) could be great stocks for SMSF income in retirement.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Many share market investors will appreciate the big dividend yields on offer in Australia compared to US markets for example where companies prefer to reinvest for growth or conduct share buybacks as a means of capital allocation over paying dividends.

In fact some companies in Australia openly payout up to 100% of their profits as dividends which means they can pay big dividends to investors. However, it's no use buying a dividend share if the value of your capital falls further than your annual dividend payments.

So if you're planning on building a strong income stream in retirement over say a 5 to 10-year or more period then you'll need to find companies with strong competitive positions or advantages to help them defend their annual profits.

Earnings pay dividends so if a company can grow its profits and earnings at the same time it's very likely to produce share price growth and income over the long term.

Below are three solid companies that manage to produce consistent earnings growth and big dividends via high payout ratios.

ASX Ltd (ASX: ASX) operates the local stock, derivative and options trading exchange and is a regulated monopoly other than some minor competition from start-up Chi-X. It has now grown earnings per share (EPS) for 6 years in a row with EPS growing 7.1% to $2.40 in FY 2018. That places it on around 25.6x trailing earnings with a trailing dividend yield of 3.5% plus full franking credits. It's likely to deliver reasonable long-term total returns to conservative investors.

Sydney Airport Holdings Pty Ltd's (ASX: SYD) share price is down 9% over the past year despite the airport reporting strong growth in its core financial and operating metrics such as the number of passengers passing through the airport on a monthly basis. The airport expects to pay out 37.5 cents per share in dividends over FY 2019 which puts it on a yield of 5.5%. It is also a monopoly-type asset likely to last the lifetime of anyone old enough to invest today.

JB Hi-Fi Limited (ASX: TCL) is the electronic goods retailer that has a dominant market position in the town and city centres of Australia. It grew earnings per share 9.2% to $2.03 in FY 2018 and the dividend was up 14 cents to $1.32 per share. This puts it on a trailing yield of 5.7% and just 11.5x earnings. It could produce excellent total returns if its strategy to fight off overseas competition succeeds.

Motley Fool contributor Yulia Mosaleva has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. The Motley Fool Australia owns shares of ASX 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 Scott Phillips.

More on Share Market News

Investor sitting in front of multiple screens watching share prices
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave the thumbs up to these ASX shares last week. Why are they bullish?

Read more »

Jessica Amir
Investing Strategies

6 ASX shares to buy and hold until the next leap year

These are the stocks to store in the portfolio until the next February 29 rolls around in 2028, according to…

Read more »

A woman ponders a question as she puts money into a piggy bank with a model plane and suitcase nearby.
Share Market News

If I invest $10,000 in Qantas shares, how much passive income will I receive in 2024?

Here's what analysts are predicting from the airline operator.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Broker Notes

These ASX 200 shares could rise 20% to 50%

Big returns could be on the cards according to analysts.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Value Investing

Looking for ASX value shares? Here's 1 I'd buy and 1 I'd avoid!

It's not an easy exercise to identify which stocks are undervalued and which ones are simply terrible. Here's an example…

Read more »

A young girl looks up and balances a pencil on her nose, while thinking about a decision she has to make.
Opinions

Will I be buying Zip shares now the company has turned a profit?

Is now the right time to buy this BNPL stock -- or not?

Read more »

a man with hands in pockets and a serious look on his face stares out of an office window onto a landscape of highrise office buildings in an urban landscape
Opinions

1 ASX dividend stock down 55% to buy right now

Here's why I think this beaten-up stock could be an opportunity.

Read more »

Three analysts look at tech options on a wall screen
Share Market News

Here's how the ASX 200 market sectors stacked up this week

ASX tech shares are on fire, leading the 11 market sectors for a third consecutive week.

Read more »