Retirees looking at ASX shares have plenty of options that could suit their portfolio. I think a few investments could make excellent buys for several reasons.
I'd want to choose ideas that have already demonstrated a pleasing level of predictability and offer a good starting dividend yield. I'd also like to see a history of regular dividend increases.
With that in mind, a couple of underrated names could make an excellent choice.
Brickworks Ltd (ASX: BKW)
Brickworks is Australia's leading brickmaker – it has been a major player for decades. Impressively, the business hasn't cut its dividend for almost 50 years.
One of the most important attributes that has helped the business deliver that consistency is its long-term cross-holding of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares, a diversified investment conglomerate that has operated for over a century. Soul Patts has steadily grown its dividend for shareholders, which has helped Brickworks.
Brickworks also has significant exposure to a portfolio of industrial properties, which are benefiting from strong economic tailwinds such as e-commerce growth. Those properties are experiencing pleasing rental growth, helping fund solid cash flow for Brickworks to utilise for its dividend.
Both Soul Patts shares and industrial properties are helping Brickworks grow its dividend, which has increased every year since 2014. For retirees looking for income from ASX shares, Brickworks has a grossed-up dividend yield of 3.5%, including franking credits.
Arena REIT No 1 (ASX: ARF)
This is a real estate investment trust (REIT) focused on owning and leasing childcare centres. I think it'd be a great pick for retirees.
Its portfolio includes 289 properties, with a long-term weighted average expiry (WALE) of 18 years. This means the rental income is locked in for the long term.
It has a portfolio occupancy rate of more than 99%. It also delivered an average like-for-like rental increase of 3.2% in the first half of FY25, which is a pleasing pace of growth.
The business has also been able to boost its rental earnings through developments and acquisitions.
Arena REIT notes it has a tailwind from rising female workforce participation, which continues to drive demand for services and increases in long day care participation rates.
The federal government has regularly improved funding for childcare, which is helping the sector's economic health.
The ASX share also has a relatively small portfolio of healthcare properties. Its latest acquisition was a health worker accommodation property in Bendigo for $35 million.
The business is expecting to grow its FY25 distribution by 4.9% to 18.25 cents per unit, which equates to a distribution yield of 4.75%.
Add in the potential boost of interest rate cuts, I think both Arena REIT No 1 and Brickworks shares are set to have a good 2025 compared to the S&P/ASX 200 Index (ASX: XJO), which may appeal to retirees.
