With term deposits offering paltry interest rates, I believe the share market remains the best place for retirees to invest their hard-earned money.
Whilst there are a good number of quality options for income investors to choose from, two ASX dividend shares that I believe are among the best on offer are listed below. Here's why I would buy them:
BWP Trust (ASX: BWP)
The first ASX dividend share that I think retirees ought to consider buying is BWP. It is a real estate investment trust with a focus on commercial properties. These assets tend to be large format retail properties which are predominantly leased to home improvement giant, Bunnings Warehouse. At the end of FY 2020, its weighted average lease expiry (WALE) stood at 4 years, with 98% of its portfolio leased.
Despite the pandemic, BWP recorded like-for-like rental growth of 2.4% in FY 2020. This supported a 1% increase in regular profit and a 1% lift in its distribution to 18.29 cents per share. The good news is that due to the strength of the Bunnings business, particularly during these challenging times, I expect a similarly positive performance in FY 2021 and the years that follow. Based on this and the current BWP share price, I estimate that it offers investors a forward 4.65% distribution yield.
Wesfarmers Ltd (ASX: WES)
Another option for retirees to consider buying right now is Wesfarmers. I think the conglomerate is a great option due to its positive long term growth potential. This is thanks to the aforementioned Bunnings business which has been performing particularly strongly during the pandemic.
This is a big positive for Wesfarmers as this business now accounts for almost two-thirds of its earnings following the Coles Group Ltd (ASX: COL) spin-off. In addition to this, I'm confident the rest of its businesses are well-positioned for growth over the next decade. And given its strong balance sheet and hefty cash balance, I suspect that Wesfarmers may bolster its growth with earnings accretive acquisitions. For now, I estimate that Wesfarmers shares offer a forward fully franked ~3.5% dividend yield.
