If you're in search of a source of income in retirement, then I think the share market is a great place to look.
Especially given how the interest rates on offer with income-generating assets like term deposits are yielding just 1% right now.
Two dividend shares that I think would be great options for retirees are listed below. Here's why I like them:
BWP Trust (ASX: BWP)
The first option for retirees to consider ahead of term deposits is BWP Trust. It is the largest owner of Bunnings Warehouse sites in Australia with a portfolio of 68 stores leased to the hardware giant. BWP withdrew its distribution guidance in March at the height of the pandemic, but soon brought it back after being able to collect rents as normal despite the economic downturn. I believe this is a testament to the quality of its tenant, which has continued to thrive during the crisis.
Last month management revealed that it currently expects to pay a second half distribution of 9.27 cents per unit, bringing the full year distribution to 18.29 cents per unit. This represents a 1% increase on the prior financial year and is in line with its previous guidance. The good news is that due to the strength of the Bunnings business, I believe this growth can continue over the coming years. As a result, based on the current BWP share price, I estimate that it offers a generous 4.7% FY 2021 distribution yield.
Rural Funds Group (ASX: RFF)
Another option for retirees to consider buying is this agriculture-focused property group. I like Rural Funds due to the quality of its portfolio of assets and its positive long-term distribution outlook. The latter is a big positive for income investors and is thanks to its long-term tenancy agreements and periodic rent increases. In respect to the former, at the last count Rural Funds had a weighted average lease expiry profile of 11.5 years.
I believe this combination means that Rural Funds is well-positioned to grow its distribution at a solid rate long into the future. This certainly will be the case in FY 2021. Management recently revealed that it intends to lift its distribution by 4% to 11.28 cents per share. Based on the latest Rural Funds share price, this equates to a yield of 5.5%. An added bonus is that it pays its distribution in quarterly instalments, which provides investors with a regular source of income.
