When building a retirement portfolio, you have to be picky when it comes to the ASX shares you buy.
At this stage, it is too risky to invest in volatile small caps that could destroy wealth in the blink of an eye.
Instead, it may be prudent to invest in defensive ASX shares that also offer a source of income. But which shares tick these boxes? Let's take a look at three buy-rated options to consider adding to your portfolio:
APA Group (ASX: APA)
APA Group is one of the more defensive shares you will find on the Australian share market, which could make it a good option for a retirement portfolio. It is an energy infrastructure business that owns, manages, and operates a diverse portfolio of gas, electricity, solar and wind assets.
The income the company generates from these assets is so reliable that APA Group has been able to increase its dividend each year for nearly 20 years. Few companies can boast of such a record.
Analysts at Macquarie appear confident this trend will continue and are forecasting the company to increase its dividend to 56 cents per share in FY 2024 and then 57.5 cents per share in FY 2025. Based on the current APA Group share price of $7.78, this equates to 7.2% and 7.4% dividend yields, respectively.
Macquarie also sees plenty of upside for its shares with its outperform rating and $9.40 price target. This suggests that they could rise over 20% from current levels.
Transurban Group (ASX: TCL)
A final ASX share that could be a good option for a retirement portfolio is Transurban. It is a toll road operator with a portfolio of important roads across Australia and North America.
UBS is tipping its shares as a buy. This is due to its positive outlook and belief that Transurban's margins are improving thanks to lower costs. In addition, it highlights that the West Gate Tunnel project is on track to complete next year and should give its earnings and dividends a boost.
The broker is forecasting dividends per share of 62 cents this year and then 66 cents in FY 2025. Based on the current Transurban share price of $12.84, this will mean yields of 4.8% and 5.1%, respectively.
UBS currently has a buy rating and $14.60 price target on the company's shares. This implies potential upside of almost 14% for investors over the next 12 months.
