Many investors would prefer to buy shares to put in the 'bottom drawer' for retirement income as they don't have the time or inclination to closely follow the share market or companies they own.
That's fair enough, but it's worth noting that while many companies will probably be around for at least the next 50 years you shouldn't consider any business as a plain set-and-forget option.
However, there's a couple of businesses that both pay strong dividends that I've regularly recommended to readers over the last few years.
As the reality is that there aren't many high-quality investment grade businesses on the ASX that pay strong dividends at the same time as being likely to keep growing over the long term.
For example the big banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) are sound options for conservative investors, as they possess dominant market positions reflected by their relatively high net interest margins and profitability compared to international peers.
Other businesses likely to deliver reasonable total returns over the long term include infrastructure monopolies Transuarban Group (ASX: TCL) and Sydney Airport Holdings Ltd (ASX: SYD). However, theses businesses could come under pressure if risk-free interest (debt) rates climb globally as is expected.
After all both Sydney Airport and Transurban are risky businesses and investors must demand an adequate yield above risk free rates as compensation for buying into businesses that carry a lot debt and could come a cropper anytime.
The two businesses I'd buy today as an investor both face financial markets, offer overseas exposure, boast aligned staff, and have strong track records of capital appreciation.
Macquarie Group Ltd (ASX: MQG) shares are up around 120% plus dividends over the past 5 years, with the bank forecasting profit growth around 15% for the fiscal year ending March 31 2019. As such it's likely to offer a forward yield of 4.8% (plus partial franking) based on analysts' estimates for dividends around $6.10 in the 12 months ahead. It's a well run business looking to leverage the green investment space for growth and I wouldn't bet against it.
Magellan Financial Group Ltd (ASX: MFG) shares are up around 260% plus dividends over the past 5 years and I expect could head higher this week after the group reports its funds under management for February 2019. It's a business I've covered multiple times before, including how through 2018 it was actually trading at the cheapest it had been in several years due to a profit multiple de-rating in line with other inferior fund managers. At $36 the stock is now closer to my estimate of fair value today and I expect it will run higher in 2019 assuming global equity markets at least tread water.
