5 dividend machines for a blue-chip retirement

You can't beat defensive cash-generating machines to help you enjoy the luxuries in life.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published June 13, 2014 1:53 pm AEST

When it comes to a relaxing retirement solid income-payers are required, the kind of stocks with defensive earnings streams that are able to generate profits whatever the economic cycle. Their strength and scale mean that you can enjoy life's luxuries in retirement knowing these businesses will most likely keep turning big profits even during the worst of crashes or crises.

A classic example is Telstra Corporation Ltd (ASX: TLS). A business forecast to payout 29 cents per share this year, placing it on a 5.55% yield when selling for $5.22. With its Network Application Services division delivering decent growth through cutting-edge technology and options to expand abroad the business has a decent growth runway ahead of it too. All backed up by a cash horde to invest for growth or potentially payout more to shareholders in the future.

Real estate is another quality source of income for investors and Mirvac Group (ASX: MGR) with its heavy exposure to the high-performing Sydney and east coast property markets looks a solid investment. Current yield is 4.8% with analysts forecasting steady dividend growth out to 2016. Another high-yielder in the sector is Stockland Corporation Ltd (ASX: SGP), its defensive income streams mean it yields 6.03% selling for $3.98 today.

Elsewhere, Sydney Airport Holdings Ltd (ASX: SYD) is a piece of infrastructure that is simply irreplaceable. With first right of refusal over whether to build the proposed second airport at Badgerys Creek, Sydney Airport has all the aces in its hand for a dominant future. Steady passenger growth combined with cost-saving efficiencies from future technologies mean the growth runway looks impressive too. It yields 5.3% currently with analysts forecasting dividends to steadily increase to 2016.

Suncorp Group Ltd's (ASX: SUN) fully franked yield is 5.1% with dividend payouts having effectively doubled since 2011. Based on projected earnings the price-earnings is 17.4 but with the profit-making potential of its giant insurance and banking businesses yet to be fully unlocked that may be cheap on medium-term horizons.

Blue-chip businesses should be the mainstay of your portfolio, but there's nothing wrong with the pursuit of a little higher growth. In fact there's another company giving investors…

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