If you're looking for ASX shares that will provide you with a good income stream in retirement, here are two of my top picks. I believe both of the following shares have excellent long-term prospects and are good choices to buy and hold for the long-run.
Macquarie Group Ltd (ASX: MQG)
Macquarie, Australia's largest investment bank, has been a real local success story with a strong track record of profitability over the last few decades. The company continues to grow its revenue and net profit, while its cost-to-income ratio has been steadily declining.
Over the past few years, Macquarie has further evolved its business model to become more balanced and diversified, rather than being too heavily focused on a small core group of operations. This was one of the reasons the Macquarie share price was hit so hard during the global financial crisis (GFC).
Over the last 10 years, Macquarie's annual profitability growth has easily 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).
Not only does Macquarie provide a good stream of income with a partially franked trailing dividend yield of 4.1%, it also continues to provide impressive share price growth. I believe that the investment bank is well placed to outperform the S&P/ASX 200 (INDEXASX: XJO) over the next 5 to 10 years.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is a highly diversified business, with strong diversification across a broad spectrum of the Australian economy. The conglomerate has operations in general retail segments including home improvement and office supplies, as well as industrial segments such as chemicals and energy.
Chances are, you're probably familiar with some of Wesfarmers' subsidiaries. These include household names such as Bunnings Warehouse, Kmart Australia, Officeworks, and online retailer Catch.
This diversification provides Wesfarmers with a buffer to a range of industry-specific challenges that might impact its subsidiaries at various times during the economic cycle.
Over the past year or two, Wesfarmers has made a number of successful acquisitions, including a lithium producer Kidman Resources. This gives Wesfarmers exposure to the rapidly growing lithium market segment, which is an essential ingredient for the hi-tech and growing Internet of Things (IoT) sector in areas such as electric vehicles.
Wesfarmers' size and scale gives the conglomerate plenty of options in terms of the types and sizes of companies it can acquire, as well as the capacity to better absorb any loss-making divisions.
Wesfarmers provides a solid dividend yield of 3.6% that is fully franked, so you'll get a 30% tax rebate on the dividend payout.
