S&P/ASX 200 Index (ASX: XJO) investors in retirement will likely need dividend income to live off. Along with this, a priority should be protecting capital and de-risking your portfolio. However, it is important not to lose sight of the magical power of compounding at high rates of return. In my opinion, all ASX investors should target the maximum total return they can achieve for their risk profile.
Investors in retirement
As investors, we’re a motley crew. We all have motley goals, motley resources and motley risk appetite. Because of this, it is important to understand your own personal circumstances and invest accordingly. The below ASX stocks will be fantastic options for most investors in retirement, but not for all.
I am a big fan of writing everything down so that you can refer back to your notes. Take the time to think about what you want to achieve by investing in ASX stocks. It will be much clearer if the following stocks are for you.
3 best ASX 200 stocks to buy now
Duxton Water Ltd (ASX: D2O)
Duxton Water is an alternative business, betting on the long-term value of water entitlements in Australia. The company owns a number of entitlements in various regions and leases these out to the agriculture industry. Management has forecast that the dividend can grow every 6 months for the next 2 years.
Duxton is priced at a large discount to its monthly net tangible assets (NTA). At current prices, the stock should be able to weather more rain in the short term. Over the long term, the scarcity and price of water is expected to rise.
Duxton has a dividend yield of 4% or 5.7% grossed-up.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
This ETF holds a basket of 62 of the ASX’s best dividend-paying stocks. The composition of holdings has changed recently in line with market and economic conditions. The ETF has sold down the banks in order to buy more reliable dividend stocks.
Two of the top holdings now include BHP Group Ltd (ASX: BHP) and Wesfarmers Ltd (ASX: WES). Given the large number of delayed payments and cancelled dividends, a forward dividend estimate is more reliable than a trailing yield. Vanguard estimates a forward yield of 6.2% or 8.48% grossed-up.
Macquarie Group Ltd (ASX: MQG)
Macquarie may perform better than the other big ASX banks given its diversified operations. The group has significant operations in investment banking and asset management. Investment banking is often the most profitable during downturns, where there is a lot of capital raising and takeovers.
For FY21, Macquarie offers investors an estimated 3.91% partially franked dividend yield.
Foolish bottom line
Retirement is an opportunity to benefit from all your hard work and sacrifices. Selling down a portion of your portfolio in high-valued markets, mixed with taking dividends in cash during bear markets is a great way to fund your lifestyle as an investor in retirement.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
Motley Fool contributor Lloyd Prout has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended DUXTON FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.