2 ASX shares for strong retirement income

Here we look at 2 ASX shares that can provide you with strong retirement income: Wesfarmers Ltd (ASX: WES) and Macquarie Group Ltd (ASX: MQG).

Phil Harpur

Phil Harpur has been contributing to Motley Fool Australia as a Freelance Writer since late 2019. Phil has spent the last 25 years working as a Senior Technology Analyst for some of the leading global technology research firms. Over the years, his market insights have been quoted in publications such as the AFR, SMH and the Australian, and he has appeared on business TV programs including Bloomberg, CNBC, Fox Business and the ABC. Phil is passionate about the share market and investing. He has post-graduate qualifications in Applied Finance and Investment from the Securities Institute of Australia. In his spare time, Phil likes to chill out listening to his favourite jazz artist or hanging out at the beach.

Published July 11, 2020 10:30 am AEST

Are you currently retired, or perhaps your approaching retirement soon and looking for a way to get some extra income?

Either way, in my view, shares that pay strong dividend yields are a much more rewarding strategy than keeping your money in a savings account or term deposit, particularly given the current low interest rates.

It's also a good idea to try to build your ASX share portfolio with at least 10 companies to ensure a diversified portfolio. This way you get exposure to a broad spectrum of the market.

So, with that in mind, I don't think you can go past these 2 ASX shares: Wesfarmers Ltd (ASX: WES) and Macquarie Group Ltd (ASX: MQG). Both of these companies have strong market positions in their respective industries. They also both have strong product and geographic diversification.

Wesfarmers

Wesfarmers is a highly diversified company with operations in retail segments including general merchandise and office supplies. Wesfarmers also has market positions in industrial segments such as energy and fertilisers, and industrial and safety products. This high level of market diversification provides a strong buffer to any industry-specific challenges that may negatively impact any of its subsidiaries.

Wesfarmers' online offerings have seen strong demand during the coronavirus crisis as many consumers have stayed away from brick-and-mortar stores. All of Wesfarmers' retail businesses have seen combined total online sales growth of 89% for the half-year so far till early June.

Based on current earnings, Wesfarmers pays a strong forward dividend yield of 3.4%, fully franked

I am confident that Wesfarmers is well placed for strong growth over the next year or two, particularly driven by rising sales at its Officeworks and Bunnings chains.

Macquarie

Macquarie is a global financial services business. Its strategy centres on international investment banking.

I definitely prefer Macquarie as an investment option in the banking and financial segment to our big four major 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).

In particular, Macquarie has less exposure to the local residential property market, which may come under increasing pressure in the months ahead.

I am also attracted to Macquarie as an ASX share investment because it has become a more balanced and diversified business than it was in the past.

Macquarie currently pays an attractive partially franked forward dividend yield of 3.5%.

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