What should we look out for in the ultimate ASX retirement stock?
Glad you asked.
Investors who have retired from their day jobs and given up their stream of reliable primary income typically have different goals and risk tolerances when it comes to their investments. For instance, income security is a top priority, as is protection against permanent capital loss.
In contrast, building wealth as fast as possible, which is what drives many younger investors, is not usually a major consideration for retirees.
With all of this in mind, let's discuss whether ASX 200 blue chip Coles Group Ltd (ASX: COL) fits the bill.
Coles is a company that probably needs little introduction for most Australians. It is the second-largest supermarket operator in the country and the owner of liquor chains, including Liquorland and Vintage Cellars.
Coles shares have been on the ASX since 2018 after the company was spun out of Wesfarmers Ltd (ASX: WES).
So, does Coles fit the bill as an ultimate retirement stock?
Well, let's go through the criteria mentioned above.
Is Coles an ultimate ASX retirement stock?
When it comes to income security, Coles arguably fits the bill well. This company habitually pays out a sizeable semi-annual dividend to its investors. These payments have always come with full franking credits attached, which are particularly attractive to retirees.
Not only does Coles tend to pay out a meaningful dividend, but the company has a strong track record of growing its dividend too. Since 2019, Coles has increased its annual dividend every single year. In 2024, for instance, investors bagged a total of 68 cents per share in dividend income. That was a pleasing hike from 2023's total of 66 cents per share.
At the company's last share price, Coles stock was trading on a dividend yield of 3.82%.
So that's one box ticked. But what about the threat of permanent capital loss?
I would argue that Coles passes this test too. As a purveyor of consumer staples goods, Coles has a highly defensive earning base that is resistant to economic threats. To illustrate, Coles has managed to grow its earnings and dividends throughout the COVID-19 pandemic and the high inflation environment of the past few years.
We all have to buy food, drinks, and other household essentials, regardless of high inflation or whether the economy is booming or in recession.
As such, I would argue that Coles stock provides far more inherent protection against permanent capital loss than most ASX shares. Almost no stock can offer perfect safety to your capital, of course. But Coles is about as good as it gets, in my view.
So yes, I would conclude that Coles fits the mould for an ultimate retirement stock and is well suited to occupy any diversified ASX retirement portfolio.
