Motley Fool Australia

2 of the best ASX shares to buy for your retirement portfolio

Retired couple reclining on couch with eyes closed
Image source: Getty Images

One of the best ways to set yourself up for a comfortable retirement is by having a passive income stream that is both reliable and has the potential to grow over time.

Investing in companies that share their profits through dividend payments is arguably the most efficient way of achieving this in the current environment.

But which ASX shares should you buy for a retirement portfolio? Two to consider are listed below:

Coles Group Ltd (ASX: COL)

The first option to consider for a retirement portfolio is this supermarket giant. It could be a good option due to its solid long term growth prospects, generous dividend policy, and defensive qualities.

Those qualities were on display for all to see in FY 2020 and the first half of FY 2021. In respect to the latter, for the six months ended 31 December, Coles reported an 8% increase in revenue to $20,569 million and a 14.5% increase in net profit to $560 million.

And while its growth will inevitably moderate now as trading conditions return to relatively normal, the company remains well-positioned over the long term. Especially given its focus on automation, which is expected to reduce costs notably in the coming years.

Combined with like for like sales growth, this should underpin solid earnings and dividend growth over the 2020s. Goldman Sachs is confident in its growth trajectory and recently retained its buy rating and $20.70 price target.

Telstra Corporation Ltd (ASX: TLS)

Another quality option for a retirement portfolio could be Telstra. While the telco giant has been underperforming in recent years, this has been driven by the NBN rollout. This rollout has led to telephone lines being removed, taking away a lucrative income stream.

The good news is that the NBN headwind is now easing and the company’s T22 strategy is delivering on its goals. As a result, management is now targeting a return to growth in FY 2022. It is also looking to unlock value by splitting the company up and monetising some of its assets.

Overall, this has analysts believing that Telstra’s dividend is now sustainable at the current level of 16 cents per share. Based on the current Telstra share price of $3.42, this represents a fully franked 4.7% yield.

Goldman Sachs is also a fan of Telstra. It currently has a buy rating and $4.00 price target on its shares.

These Dividend Stocks Could Be Your Next Cash Kings (FREE REPORT)

Motley Fool Australia's Dividend experts recently released a brand-new FREE report revealing 3 dividend stocks with JUICY franked dividends that could keep paying you meaty dividends for years to come.

Our team of investors think these 3 dividend stocks should be a 'must consider' for any savvy dividend investor. But more importantly, could potentially make Australian investors a heap of passive income.

Don't miss out! Simply click the link below to grab your free copy and discover these 3 high conviction stocks now.

Returns As of 15th February 2021

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Related Articles…