It's a pretty rough environment for retirees right now. I think shares could be the answer.
Money in the bank is hardly earning any interest at all. Property is looking as though it's about to have a sharp decline, and landlords are expected to burden some of the financial pain.
I think shares are the only answer for retirees. Prices are now much cheaper, which has boosted the yield considerably.
Here are three shares that I think every retiree should have in their portfolio:
WAM Global Limited (ASX: WGB)
I think WAM Global is one of the best shares for retirees. It's a listed investment company (LIC) that invests in overseas shares.
Many Aussies don't have enough exposure to the international share market considering the ASX is only 2% of the global market capitalisation.
The aim of WAM Global is to be invested in a portfolio of international growth companies where there's a catalyst that could send the share price higher sooner rather than later.
At the end of March some of its largest positions were: Tencent, Aon, CME, Costco, Doller General, Hasbro, Intuit, Logitech, Lowe's, Microsoft, Nestle, Paypal and Ubisoft. It's a diverse group which should do well during this period.
The WAM LICs are known for paying growing dividends. WAM Global currently offers an annualised grossed-up dividend yield of 4.6% and it's trading at a large discount to its net tangible assets (NTA).
Brickworks Limited (ASX: BKW)
There are few businesses on the ASX that could challenge Brickworks' dividend history.
Brickworks has maintained or grown its dividend every year for over 40 years. That's excellent stability.
The dividend has been so strong for a few key reasons. The first is that it operates a quality building products division that offers a variety of materials for builders. Most importantly, Brickworks is the leading brickmaker in Australia. A wealthy, growing country like Australia should see good levels of construction for many years to come.
As a recent bonus, Brickworks has acquired a few brickmakers in the US which has made it into the leading brickmaker in the north east of the US. The United States has a much larger total addressable market than Australia. It's a great opportunity.
The other reason for its great dividend are its other assets. Its 'investments' and industrial property trust have been providing reliable and growing cashflow for many years already. I expect this will continue for decades to come.
Those other assets alone backup Brickworks' market capitalisation and dividend. The building products divisions are just bonuses. Brickworks currently offers a grossed-up dividend yield of 6.2%.
Rural Funds Group (ASX: RFF)
I believe that Rural Funds is set up as one of the best income shares on the ASX.
The farmland real estate investment trust (REIT) aims to increase its distribution by 4% a year for unitholders. This is supported by a number of different factors.
First, its rental contracts with its agricultural tenants are linked to either a fixed 2.5% increase per annum or linked to CPI inflation, plus market reviews.
Second, the REIT regularly invests in productivity improvements at the farms which is beneficial for the tenant and adds to rental income plus the long-term value of the farm.
Third, Rural Funds occasionally makes an acquisition which adds to the diversification of the farm portfolio and adds another earnings stream. Lately it has been targeting farms it can make the productivity improvements with, using its 20% of retained cash earnings each year.
I like the diversification of the farms with it owning properties in a number of sectors including almonds, macadamias, cattle, cotton and vineyards.
It currently offers a FY21 distribution yield of 6.1%.
Foolish takeaway
I think it's most important for retirees to get exposure to WAM Global for the international shares (currently at a great NTA discounted price). But Brickworks has an incredibly good long-term track record for paying income with strong growth plans and would be my first investment.
