If you only focus on buying high-quality growth businesses and take a buy-to-hold approach it's possible to build a $1 million share portfolio 1o or 20 years before you retire. Perhaps even sooner if you pool funds with a partner.
However, once you reach retirement you're likely to prioritise income over growth as without a regular pay cheque coming in you'll need income to meet living expenses and splash out on the odd luxury like an overseas holiday.
If you're running your funds in an SMSF you can also take advantage of extensive tax breaks.
While most retirees on an otherwise low income could also take advantage of franking credit cash refunds if they have a portfolio stuffed full of fully franked dividend shares.
However, the fundamentals of buying strong businesses on decent valuations remain non-negotiable unless you want to increase the chances of blowing up your retirement pot.
This is because it's generally a mistake to buy shares solely for income and this mistake is getting much commoner due to the falling cash rate environment today.
Keeping all this in mind let's take a look at 5 shares that could be decent opportunities in my opinion.
Sonic Healthcare Ltd (ASX: SHL) is the pathology and radiology business with a second-to-none track record of dividend growth. The business model of organic and acquisitive growth is underpinned by the rising demand for its healthcare services globally. It also has a strong internal culture and steady management team that counts as much as anything else.
Magellan Financial Group Ltd (ASX: MFG) is the founder-led fund manager that offers a 3.7% trailing dividend yield plus full franking credits. It looks on course to deliver another strong half of underlying profit growth over the 6 months to December 31 2020. Culture and staff alignment are also strong.
Macquarie Group Ltd (ASX: MQG) will hand in its half year report in November and is still guiding for full year profit to be slightly down on the prior year. However, the upcoming first half profit is expected to be 10% up on the prior corresponding half. If we assume it keeps dividends flat over fiscal 2020 it offers a trailing yield of 4.3% plus partial franking credits. Again, culture and staff alignment are strong.
Accent Group Ltd (ASX: AX1) is a well run footwear retailer I'd be happy to pick up shares in today as it trades on a reasonable valuation with a big dividend to boot. At $1.52 it's on 15.1x trailing earnings with a 5.4% yield plus full franking credits. That looks reasonable to me given it could post another year of double digit profit growth. I'm admittedly not certain on culture and staff alignment with this business, but it has a great track record.
Washington H. Soul Pattinson (ASX: SOL) is the investment conglomerate with an impeccable track record of dividend growth. The stock has also given back some ground over 2019 to provide a decent entry point for long-term investors who like to be aligned with management. Again, culture and staff alignment are strong.
