2 ASX income shares to buy for retirement

If you're looking for ASX shares that will provide you with a good income stream in retirement, here are two of my top picks.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you're looking for ASX shares that will provide you with a good income stream in retirement, here are two of my top picks. I believe both of the following shares have excellent long-term prospects and are good choices to buy and hold for the long-run.

Macquarie Group Ltd (ASX: MQG)

Macquarie, Australia's largest investment bank, has been a real local success story with a strong track record of profitability over the last few decades. The company continues to grow its revenue and net profit, while its cost-to-income ratio has been steadily declining.

Over the past few years, Macquarie has further evolved its business model to become more balanced and diversified, rather than being too heavily focused on a small core group of operations. This was one of the reasons the Macquarie share price was hit so hard during the global financial crisis (GFC).

Over the last 10 years, Macquarie's annual profitability growth has easily outperformed that of Australia's big four retail banks – Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ).

Not only does Macquarie provide a good stream of income with a partially franked trailing dividend yield of 4.1%, it also continues to provide impressive share price growth. I believe that the investment bank is well placed to outperform the S&P/ASX 200 (INDEXASX: XJO) over the next 5 to 10 years.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is a highly diversified business, with strong diversification across a broad spectrum of the Australian economy. The conglomerate has operations in general retail segments including home improvement and office supplies, as well as industrial segments such as chemicals and energy.

Chances are, you're probably familiar with some of Wesfarmers' subsidiaries. These include household names such as Bunnings Warehouse, Kmart Australia, Officeworks, and online retailer Catch.

This diversification provides Wesfarmers with a buffer to a range of industry-specific challenges that might impact its subsidiaries at various times during the economic cycle.

Over the past year or two, Wesfarmers has made a number of successful acquisitions, including a lithium producer Kidman Resources. This gives Wesfarmers exposure to the rapidly growing lithium market segment, which is an essential ingredient for the hi-tech and growing Internet of Things (IoT) sector in areas such as electric vehicles.

Wesfarmers' size and scale gives the conglomerate plenty of options in terms of the types and sizes of companies it can acquire, as well as the capacity to better absorb any loss-making divisions.

Wesfarmers provides a solid dividend yield of 3.6% that is fully franked, so you'll get a 30% tax rebate on the dividend payout.

Motley Fool contributor Phil Harpur owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, and Westpac Banking. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of National Australia Bank Limited and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why EML, GQG Partners, IGO, and Integrated Research shares are sinking today

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a strong gain. At the time of…

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why EOS, News Corp, Polynovo, and Pro Medicus shares are roaring higher today

These shares are starting the week positively. But why?

Read more »

A couple stares at the tv in shock, one holding the remote up ready to press.
Mergers & Acquisitions

Telstra share price climbs amid $3.4b Foxtel sale

Who is buying the Foxtel business? Let's find out.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Share Market News

Brokers say these ASX 200 growth stocks could rise 50% to 70%

Analysts think these shares could be dirt cheap and destined to generate big returns.

Read more »

Two people having a meeting using a laptop and tablet to discuss Seven West Media's balance sheet
Broker Notes

Why these ASX shares could be top SMSF options in 2025

Analysts are bullish on these high-quality shares. Let's find out why.

Read more »

The words short selling in red against a black background
Share Market News

These are the 10 most shorted ASX shares

Let's see which shares short sellers are targeting this week.

Read more »

Smiling man with phone in wheelchair watching stocks and trends on computer
Share Market News

5 things to watch on the ASX 200 on Monday

A good start to the week is expected for Aussie investors. Here's what to watch.

Read more »

A businessman compares the growth trajectory of property versus shares.
Opinions

What's the outlook for shares vs. property in 2025?

The experts have put out their new year predictions...

Read more »