For retirees living off superannuation, dividend investing can be a great strategy to generate a steady stream of income without having to sell shares regularly.
By investing in quality companies that pay consistent dividends, retirees can help support their living expenses. Dividend shares allow this while still giving their portfolio the opportunity to grow over the long term.
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The balancing act
When choosing dividend shares, it's important to look for a balanced dividend yield rather than one that is extremely high.
A high dividend yield can sometimes be a warning sign that the company's share price has fallen due to financial problems. This can make the dividend harder to sustain.
On the other hand, a very low dividend yield may provide little income and could indicate that the company prioritises growth over returning profits to shareholders.
A balanced dividend yield often suggests that the company is financially stable, generates consistent earnings, and is able to reward shareholders while still investing in its future.
What is considered a good yield in Australia?
For years, the ASX has been one of the best places in the world for dividend investors.
Australian companies have a long history of paying generous dividends. This has made the local share market a favourite among investors looking to build a reliable stream of passive income.
The numbers back it up. According to S&P Global, the S&P/ASX 300 Index (ASX: XKO) had a trailing 12-month dividend yield of 3.5% as of 31 December 2024.
That's comfortably ahead of Europe (3.2%), Canada (2.8%), and the United States (1.8%).
For retirees looking to better this number, here are three ASX dividend shares that could supplement your superannuation and beat this 3.5% benchmark.
Harvey Norman Holdings Ltd (ASX: HVN)
Harvey Norman is a popular dividend stock due to its strong cash generation, fully-franked dividends, and a history of returning excess capital to shareholders.
Bell Potter is forecasting fully-franked dividends of 31.1 cents per share in FY 2027. This is followed by 33.3 cents per share in FY 2028.
This results in a dividend yield of over 6% over the next two years.
Propel Funeral Partners Ltd (ASX: PFP)
Another option to generate passive income alongside your superannuation is Propel Funeral Partners.
It is an attractive dividend stock because of its defensive business model, recurring demand, and consistent earnings growth.
Based on CMC Invest's forecast, the potential grossed-up dividend yield for FY26 is 5.5%, which could rise to over 6% by FY28.
Collins Foods Ltd (ASX: CKF)
Collins Foods is another stock offering above-average yields.
It is a solid dividend stock because its ownership of established quick-service restaurant brands, including KFC operations in Australia and overseas, provides resilient cash flows that support reliable dividend payments over time.
Morgans is forecasting fully-franked dividends per share of 31 cents in FY 2027 and 35 cents in FY 2028.
This equates to a yield of around 4%.
