2 ASX shares to buy for rock solid retirement income

I think the two ASX shares in this article can provide rock solid retirement income, 1 is Australian United Investment Company Ltd (ASX:AUI).

| More on:

You鈥檙e reading a free article with opinions that may differ from The Motley Fool鈥檚 Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I think there are some ASX shares that are great options to buy for rock solid retirement income.

As we've seen this year and over the past few years, businesses like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Telstra Corporation Ltd (ASX: TLS) and Transurban Group (ASX: TCL) have cut their dividends to shareholders.

There are less popular names that have been much more reliable for dividend income. Here are two ASX share ideas for rock solid income:

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts is one of the best ASX dividend shares in my opinion. It certainly doesn't offer the biggest yield, but in terms of reliability I think it's the clear leader.

It has grown its dividend every year for the past two decades, including through COVID-19. That's the most reliable growth record on the ASX.

One of the main reasons why it has done so well is its diversification. It owns a variety of different businesses and assets in its portfolio such as TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), Bki Investment Co Ltd (ASX: BKI) and Milton Corporation Limited (ASX: MLT).

Soul Patts funds its dividend purely from the cashflow (dividends and distributions) from its investments, after paying for its expenses. In FY20 it only paid out 57% of its net cashflow as dividends to shareholders. That means 43% of the cashflow can be invested into other opportunities to increase FY21's cashflow.

Not only can Soul Patts grow its dividend from its re-invested capital, but its underlying holdings of ASX shares will also hopefully grow their dividends.

Holdings like Clover Corporation Limited (ASX: CLV), Magellan Financial Group Ltd (ASX: MFG) and Wesfarmers Ltd (ASX: WES) are attractive long-term dividend growth ideas.

I also like that Soul Patts is trying to generate growing profit from good unlisted investments like agriculture, swimming schools, resources and Ampcontrol.

At the Soul Patts share price it offers a grossed-up dividend yield of 3.6%.

Australian United Investment Company Ltd (ASX: AUI)

Australian United Investment (AUI) is a listed investment company (LIC). It was founded in 1953 by the late Sir Ian Potter, and The Ian Potter Foundation Ltd is today the company's largest single shareholder.

It invests in many of Australia's biggest ASX shares including CSL Limited (ASX: CSL), Commonwealth Bank of Australia (ASX: CBA), Transurban, Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP). But it also has larger weightings to some ASX shares like Diversified United Investment Limited (ASX: DUI), Atlas Arteria Group (ASX: ALX) and Soul Patts which aren't among the biggest 20 shares on the ASX.

Its operating expenses were just 0.12% of the average market value of the portfolio over FY20, which is extremely cheap. The lower the expense ratio of a portfolio investment (like a LIC), the more of the net returns that are left in the hands of shareholders.

AUI has grown or maintained its dividend every year over the past 30 years. That's a very strong record. Very few businesses can point to that level of strength of their dividend payments. Future dividends are not guaranteed to be reliable, but I think it's a good indicator of how AUI likes to operate with regards to dividends.

At the current AUI share price it offers a grossed-up dividend yield of 6.5%. It's trading at a 6% discount to the AUI pre-tax net tangible assets (NTA) per share at 31 August 2020.

Foolish takeaway

Both of these ASX dividend shares have been very reliable over the past two decades. Out of the two I'd prefer to buy Soul Patts because of its higher focus on growth and its wider investment mandate. However, AUI is one of my preferred ways to invest in ASX blue chips.

Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Clover Limited and CSL Ltd. The Motley Fool Australia owns shares of and has recommended Brickworks, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Transurban Group 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.

More on 鈴革笍 Dividend shares for retirement

letter blocks spelling out the word retire
鈴革笍 Dividend shares for retirement

2 star stocks for your ASX retirement portfolio

Coles Group Ltd (ASX:COL) and this ASX share could be great options for a retirement portfolio in 2021 instead of…

Read more

鈴革笍 Dividend shares for retirement

3 top ASX dividend shares for a better retirement

Looking to use ASX dividend shares to retire? Here are 3 income shares to consider, including Telstra Corporation Ltd (ASX:…

Read more

piles of coins increasing in height with miniature piggy banks on top
Investing Strategies

Are ASX growth shares the new way to get yield?

Experts say the days of 'set and forget' income investing is over. Now you have to be active and willing…

Read more

letter blocks spelling out the word retire
鈴革笍 Dividend shares for retirement

Why I would buy Wesfarmers (ASX:WES) and this ASX share for a retirement portfolio

Here's why I would add Wesfarmers Ltd聽(ASX:WES) and this ASX share to a retirement portfolio today...

Read more

鈴革笍 Dividend shares for retirement

Is the WAM Global (ASX:WGB) share price a buy for dividends?

Is the WAM Global Limited (ASX:WGB) share price a buy for income? It currently offers a grossed-up dividend yield of…

Read more

鈴革笍 Dividend shares for retirement

Investors wanting safe income should own these 3 ASX shares

If you鈥檙e seeking safe income then I think you should go for one of the three ASX shares in this…

Read more

鈴革笍 Dividend shares for retirement

Is the AFIC share price a buy?

Is the Australian Foundation Investment Co.Ltd. (ASX:AFI) share price a buy? The LIC has recently declared another steady dividend.

Read more

鈴革笍 Dividend shares for retirement

Why retirees should buy Coles and Telstra shares for income

I think Coles Group Ltd聽(ASX:COL) and this ASX 100 share would be great options for retirees looking for a source…

Read more