No doubt, the approach to retirement can be both exhilarating and daunting, with the prospect of abundant free time perhaps contrasted against potential financial pressure. Fortunately, S&P/ASX 200 Index (ASX: XJO) dividend shares can help provide passive income during retirement.
A passive income is just that – passive. Those who create one can sit back and enjoy periodic payments, rarely lifting a finger to actively manage it.
ASX 200 dividend-paying companies generally pay out a portion of their profits to those invested in their shares every half year. That could be a huge benefit to retirees.
Additionally, dividend shares can act as an inflation hedge, as they can provide returns faster than inflation can eat away at cash in a savings account.
That's not to say that all ASX 200 dividend shares will suit any one investor. Particularly, if said investor is considering retirement.
Let's take a look at what one might want to consider when building a passive income for retirement using ASX 200 dividend shares.
How I would buy ASX 200 dividend shares for retirement
There are a few measures one looking to retire might want to consider before hunting out ASX 200 dividend shares.
The first is the intended length of their prospective investment.
Assumably, a retiree would be aiming to hold their investment for years or decades, with the goal of receiving dividends over the life of their holding.
Thus, if I were about to retire, I would consider focusing my attention on ASX 200 blue-chip shares. They generally offer more stability due to their proven track record and strong financial position.
I would also make a point to diversify my portfolio, adding shares from various industries and companies. That way, my portfolio would be better protected against single-sector or -company downturns.
Fortunately, there are plenty of stocks that fit that bill. Some ASX 200 dividend shares are even currently brokers' recommendations.
3 ASX 200 dividend shares rated buys right now
Coles Group Ltd (ASX: COL)
Readers will likely know exactly what business Coles is in. The company operates one of Australia's largest supermarket chains.
Investors have enjoyed consistent dividends since it was spun out of Wesfarmers Ltd (ASX: WES) in late 2018. And Morgans thinks it could grow both its share price and its payouts in coming years, as my colleague James reports.
The broker tips the Coles share price to rise 18% to $19.50. While its dividends are forecast to lift to 64 cents this financial year and to 66 cents the year after.
Westpac Banking Corp (ASX: WBC)
Once again, Aussies would be hard-pressed not to recognise blue-chip bank share Westpac.
Following the banking giant's latest results, Citi expects the ASX 200 share to lift 26% to $30. While Goldman Sachs believes its dividends will increase to $1.48 in financial year 2023.
Stockland Corporation Ltd (ASX: SGP)
Finally, shares in ASX 200 housing developer and commercial property group Stockland could be in for a good run, according to Goldman Sachs.
The broker expects the stock will gain 23% to trade at $4.40, saying potential residential headwinds are already priced in.
It also thinks Stockland's dividends will increase to 28 cents per share this fiscal year and next.
