If you're approaching retirement and worried about the prospect of living on the Age Pension, you're not alone. Although the Pension is one of Australia's most important social safety nets, it can be difficult to lead a comfortable retirement on $813 a week (couple rate), particularly if you rent or haven't paid off the mortgage on your home. That's where ASX dividend income stocks can help.
Unlike cash investments, such as term deposits, dividend-paying stocks can offer meaningful returns that exceed inflation and can increase over time without requiring additional investment.
Investing in any stock carries risks, of course. However, with the right stocks, I believe any Australian can enjoy a more comfortable retirement compared to if they were to rely solely on their cash savings and the Pension.
So today, let's talk about seven ASX income stocks that I think would serve a retiree, or pre-retiree, for decades to come.
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Seven ASX dividend income stocks to supplement the pension
Coles Group Ltd (ASX: COL)
First up, we have a familiar name in Coles. What makes Coles a prudent long-term income investment for someone at or approaching retirement age is its defensive nature. We all need to eat and stock our households with life's essentials. As long as Coles offers these goods at convenient locations and affordable prices, its business should do well in all economic circumstances. Coles also pays a decent dividend, which has always come with full franking credits attached.
Telstra Group Ltd (ASX: TLS)
Telstra offers many of the attributes that make Coles a compelling retirement stock. Consider how indispensable internet connections and mobile phones are to our modern world. When we also consider that Telstra is the clear market leader in providing both of these services in Australia, its value becomes apparent. Telstra also offers stable dividend income that has always come fully franked.
Commonwealth Bank of Australia (ASX: CBA)
ASX banks are famous for their fat, and mostly fully franked, dividends, and CBA is no exception. CBA has been very expensive for a long time, but has recently come off the boil a little. Although still expensive, the current pricing on this income stock may provide a potentially decent entry point for long-term investors.
Transurban Group (ASX: TCL)
You may be familiar with Transurban as the large company that operates most of the major toll roads in the country. Whilst these tolls might be the bane of motorists, they are a highly reliable source of revenue for Transurban, which makes it a good candidate as an income stock for retirement. Although this stock's dividends don't offer much in the way of franking credits, it does usually have a high and stable yield on the table.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is next up. This retail and industrial conglomerate has numerous underlying businesses, making it one of the most diversified ASX blue-chip companies. Its crown jewels are the retailers like Bunnings, OfficeWorks and Kmart, though. Wesfarmers has demonstrated itself to be a conservative and prudent manager of capital for decades. Given the ongoing dominance of this income stock's underlying businesses, Wesfarmers arguably seems primed to continue its track record.
Lottery Corp Ltd (ASX: TLC)
Lottery Corp is the company behind most lotteries and Keno games across Australia. The temptation to win a jackpot is a universal one, and grips Australians regardless of the state of the broader economy. Given that Lottery Corp has exclusive licenses to run these services in most states and territories for years to come, this makes Lottery Corp a reliable income stock to consider for a retirement portfolio. The company pays a decent, and fully franked, dividend.
Australian Foundation Investment Co Ltd (ASX: AFI)
AFIC is a listed investment company (LIC) that invests in a broad portfolio of underlying shares itself. It has been following the same set of rules for decades and has consistently delivered decent returns for its investors, with a focus on capital protection. The beauty of stocks like AFIC is that the company's management makes the tough investment decisions for you, making it a true 'bottom-drawer' investment. AFIC pays a highly stable dividend income, which is also fully franked.
