If you’re a retiree, you might be looking for a way to generate an income after the interest rates on traditional interest-bearing investment products collapsed over the last few years.
One way you can do this is by investing in dividend shares. Luckily, the Australian share market is home to a large number of them.
But which ones should you buy? Here are two that I like:
BWP Trust (ASX: BWP)
One of my favourite options for retirees is commercial real estate company BWP. The majority of its properties are leased to retail giant Bunnings Warehouse, which is owned by Wesfarmers Ltd (ASX: WES). Given the quality of the Bunnings business and its strong performance during the pandemic, BWP was largely unaffected by the crisis in FY 2020. In fact, just $435,886 of rent abatements were granted during the height of the pandemic. This meant 98.8% of rent was collected as normal during the months of March to June.
While management didn’t provide any real guidance for the year ahead, it expects to at least pay a distribution in line with the 18.29 cents per unit it paid shareholders in FY 2020. Based on the current BWP share price, this equates to a 4.5% distribution yield. Looking longer term, I believe the company is well-placed to continue growing its income and distribution consistently over the remainder of the decade.
Coles Group Ltd (ASX: COL)
Another high quality option for retirees to consider buying is Coles. In fact, I would argue that it is the best ASX share for a retirement portfolio. This is due to its defensive qualities, attractive dividend yield, and solid long term growth prospects.
In respect to the latter, I believe Coles is well-placed for growth over the 2020s thanks to its long track record of delivering same store sales growth, strong market position, and its refreshed strategy. This strategy is embracing automation, cutting costs, and supporting margin expansion. Overall, I’m confident Coles can grow its earnings and dividend at a solid rate over the 2020s.
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. 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.