Are you currently retired and looking for a way to get some extra income? Or maybe you're approaching retirement soon and would like to get ready for that important next step?
Either way, in my view, ASX shares that pay high dividends are a much better alternative than keeping your money in a savings account or term deposit, where the interest you earn doesn't even cover inflation.
In addition to this, shares have the great advantage of providing you with long-term capital gains, provided that you have a long-term investment horizon.
So, with that being said, here are 2 ASX dividend shares to help you set up an income stream in retirement. I have chosen these two shares for the reasons I mentioned above. Not only will they provide you with a good stream of income, I believe both shares are also likely to provide you with capital growth over the long-term.
Sydney Airport Holdings Pty Ltd (ASX: SYD)
The Sydney Airport share price has lost a bit of ground since mid-January, possibly due to concerns over the coronavirus and the potential impact it can have on travel. There is currently a temporary ban on tourists travelling from mainland China to Australia, and some Australians in general are cautious about travelling right now.
However, the Sydney Airport share price hasn't been impacted as much as other travel-related shares such as Webjet Limited (ASX: WEB) and Corporate Travel Management Ltd (ASX: CTD). I believe this to be a strong indicator of Sydney Airport's resilience to negative market impacts.
Sydney Airport is a pure monopoly, which gives the company enormous pricing power. This monopoly status also enables it to leverage long-term growth potential as passenger numbers will continue to climb over the long term, driven by increasing domestic and international travel.
On the Thursday just gone (20 February), Sydney Airport released its full-year earnings for 2019. It reported earnings before interest, tax, depreciation and amortisation (EBITDA), excluding other expenses, of $1,336 million. This result was up by 4% on the prior corresponding period.
Sydney Airport shares currently offer a very attractive 4.65% dividend yield.
Telstra Corporation Ltd (ASX: TLS)
Telstra, Australia's largest telecommunications provider, has been undergoing some recent short-term adjustments as it restructures into a leaner company in order to retain its dominant number one market position. This is reflected in Telstra's half-year earnings for FY20 which were released to the market last week. The telco's total income fell by 2.8% in the period to $13.4 billion, while its underlying EBITDA fell 6.6% to $3.9 billion.
This restructuring strategy is necessary following the introduction of Australia's National Broadband Network (NBN) by the Australian government. However, once this restructuring is complete, Telstra will be able to more effectively compete with the growing competition in the fixed broadband market. The telco has now reached the halfway point of its 'T22' strategy.
With this, I believe Telstra is now well on the way to be positioned for strong growth over the next five years. Telstra shares also currently offer an attractive fully franked dividend of 3.48%, providing shareholders with a solid income stream.
