Are you currently retired and looking for a way to get some extra income? Or maybe you are approaching retirement soon?
Either way, in my view, shares that pay high dividends are a much better alternative than keeping your money in an interest savings account or term deposit, where the interest you get from them doesn't even cover inflation…
So here's a closer look at 3 of my top picks for income shares: Macquarie Group Ltd (ASX: MQG), Wesfarmers Ltd (ASX: WES) and BHP Group Ltd (ASX: BHP).
Macquarie
As Australia's largest investment bank, Macquarie continues to grow its revenue and net profit. In fact, its strong track record of profitability reaches back over the last few decades. Macquarie has also become a more balanced and diversified business over the past few years.
Its annual profitability growth over the last 5 years has outperformed that of Australia's big four retail banks – Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ).
Macquarie provides a good income stream with a partially franked dividend of 4.2%, as well as solid share growth.
It's also currently trading with an attractive P/E ratio of 17.1 and I believe that it is well placed to continue to grow strongly over the next few years.
Wesfarmers
Wesfarmers owns a number of subsidiaries, some of which are household names such as Bunnings Warehouse, Kmart Australia and Officeworks.
It has operations in general retail segments including home improvement, general merchandise and office supplies, as well as industrial segments with operation including chemicals and energy.
As Wesfarmers is a highly diversified business, this makes it a very attractive long-term investment, as its market diversification provides a buffer to any industry-specific challenges.
Wesfarmers will also provide you with a good income stream as it pays out an appealing full franked dividend yield of around 3.7%.
BHP
BHP is my pick of the ASX resource sector shares. It is a diversified natural resources company and is one of the world's top producers of commodities like iron ore, coal and copper. As it is the 3rd largest share listed on the ASX, not only can it leverage economies of scale it is frequently bought and held by super funds and managed funds providers.
FY19 was a very successful year for BHP, with strong growth across its various segments. BHP increased its dividends in 2019, boosted by strong iron ore prices. The easing tensions in the trade war between US and China should assist BHP's growth in FY20 and FY21, due to the fact that China accounts for around half of the world's consumption of metals.
BHP also has a very attractive price-to-earnings ratio of 13.9.
