I think there are some ASX shares that every retiree should own in their portfolio.
I’m not a fan of ‘old school’ ASX shares like Westpac Banking Corp (ASX: WBC) or Telstra Corporation Ltd (ASX: TLS). I believe that good earnings growth needs to be likely over the medium-term-to-long-term for an investment to make sense. I don’t see that for Westpac or Telstra, but I do see it for these ASX shares:
Rural Funds Group (ASX: RFF)
Rural Funds is an agricultural real estate investment trust (REIT) which owns a variety of farms including cattle, cotton, macadamias, almonds and vineyards.
I like the diversification offered. Its farms are diversified by farm type, different climatic conditions and they are geographically diverse.
I believe that Rural Funds is an ASX share that would be a good choice for all retirees.
It aims to increase its distribution by 4% each year. It’s able to do this thanks to a few different factors. It has contracted rental growth which is either fixed at a 2.5% increase per annum or linked to CPI inflation, plus market reviews. Rural Funds also invests in its farms for productivity improvements, which increases rental income and the valuation of the farms. Rural Farms will occasionally make an accretive acquisition too.
I think Rural Funds is a very defensive business with a pleasing distribution. At the current Rural Funds share price it has a FY21 distribution yield of 5%.
Magellan Global Trust (ASX: MGG)
Magellan Global Trust is a listed investment trust (LIT) which invests in the highest-quality global shares that it can find.
Not many of the best global businesses are ASX shares. They are listed overseas, usually in the US. Some of its largest holdings are: Alibaba, Alphabet, Atmos Energy, Eversource Energy, Facebook, Microsoft, Reckitt Benckiser, Tencent, Visa and Excel Energy.
It offers good diversification both geographically and through the industries it’s invested in. Whilst many of the businesses it’s invested in are listed in the US, the underlying revenue is generated from across the world.
The biggest investment allocation is to internet and ecommerce businesses. These are the businesses with inherent operating advantages and they can also continue to perform during these difficult COVID-19 times.
Magellan Financial Group Ltd (ASX: MFG) has performed strongly with its investment funds over the past decade and I think many Aussie investors need to expand their portfolio to non-ASX shares. This LIT is a good way to do it.
A bonus is that Magellan Global Trust targets a 4% distribution yield. At the current Magellan Global Trust share price it’s trading at a 5% discount to the net asset value (NAV) per unit.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts could be one of the best ASX shares for retirees. It’s a great ASX dividend share.
It has grown its dividend every year since 2000. It has actually been listed since 1903 and paid a dividend every year since then. That’s a reliable track record. It’s good to know you’re likely to get a bigger dividend than last year.
The investment conglomerate owns a variety of investments. It’s invested in ASX shares like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), Australian Pharmaceutical Industries Ltd (ASX: API), Clover Corporation Limited (ASX: CLV), Milton Corporation Limited (ASX: MLT) and Bki Investment Co Ltd (ASX: BKI).
Soul Patts also owns unlisted businesses like resources, agriculture and swimming schools.
It’s probably not going to generate huge returns like tech shares, but it’s a business you could invest in and hold for decades.
At the current Soul Patts share price it offers a grossed-up dividend yield of 4.1%.
I think each of these ASX shares are good options for retirees for the long-term. I believe it’s important to get international exposure, so Magellan Global Trust could be a decent option. However, for long-term Australian business investing I think Soul Patts is the best option.