If you are currently in your 50s, I'm sure you are looking forward to retirement. You may be considering putting together a share portfolio of dividend-paying companies to help fund your retirement, but you're worried time is running out.
Obviously you have less time than if you were 10 years younger. But there's a quote I wish to paraphrase: "The best time to invest is 10 years ago. The second best is today".
Besides, being in your 50s may give you an investment period of around 10 years before retirement. A decent stretch to experience the effects of compounding. Not to mention the time during retirement.
You probably already have a super fund, but depending on its size you may want to supplement this to improve your retirement lifestyle. Or to even help you retire early. That's where dividend-paying ASX shares come into the story.
What to look for on the ASX
During retirement, since you are living off the proceeds from your share portfolio, I believe your primary concern would be its dividend payments, with capital appreciation or preservation likely being a secondary concern. Simply put, would you be as concerned with your portfolio dropping 20% over the short term if its dividend payments are still maintained?
So, in my view, you want to look for companies which have a strong history of dividend payments. And also a strong history of dividend growth.
Consider Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). 'Soul Patts' has paid a dividend every year since 1903, with an ordinary dividend compound annual growth rate of around 11% since 2000.
At the time of writing, Soul Patts has a grossed-up dividend yield of 4.8%. And if it were to sustain its 11% dividend growth rate over the next 10 years until your retirement, its effective dividend yield would grow to 13.6%.
Putting this simply, an investment of $100,000 today could yield you almost $14,000 (including franking tax credits) in your first year of retirement. And if Soul Patts' dividend record remains intact, this payment would grow and continue to be paid every year. All from that initial $100,000 investment. Not to mention the opportunity for capital growth, where Soul Patts has outperformed the All Ordinaries (ASX: XAO) by an average of 2.6% per annum over the past 15 years.
Other ASX dividend shares to buy
If you're planning on buying dividend shares to fund or subsidise your retirement, I would recommend buying a minimum of around 8 to 10 different companies. After all, if one company begins to struggle economically, you don't want to lose your entire living allowance.
Macquarie Group Ltd (ASX: MQG) also boasts a strong dividend history with a compound annual dividend growth rate of 13% since inception in 1996. This is despite dividend cuts during the GFC.
A more stable dividend option might be Rural Funds Group (ASX: RFF). Rural Funds recently confirmed its 4% dividend increase despite current economic conditions. This is an increase it plans to implement every year over the long term thanks to its long-term lease agreements.
Listed Investment Companies (LICs) can also be a great way to receive dividend income. Aside from the obvious diversification benefits, they also have the ability to 'smooth' dividend payments. This is because they can payout both capital gains and dividends received as distributions to shareholders, holding onto extra profit in one period to pay it out in another. With WAM Leaders Ltd (ASX: WLE) holding some of Australia's largest public companies, I believe it will be a great dividend-payer over the coming years.
