It's normal to have some skittishness about the prospects of retiring, as well as the usual (and understandable) excitement. By the time most of us are retired, or at least approaching retirement, we have been working and enjoying an active income stream for more than four decades.
It can be a big mental hurdle to come to terms with the loss of this income security when facing its absence in retirement. But I think investing in quality ASX stocks can help eliminate any fears you might have about transitioning from active to passive income.
So here are seven such quality stocks that I think can ease anyone's doubts about retiring with their prospects for stable, reliable dividend income, as well as franking credits.
7 quality ASX stocks for a comfortable retirement
Coles Group Ltd (ASX: COL)
Everyone knows Coles, the number-two player in the Australian grocery and supermarket space. I think Coles is a great choice for a retiree or pre-retirees due to its impressive dividend policy. Since 2019, Coles has given its investors a dividend pay rise every single year, including throughout the COVID pandemic.
Due to its defensive traits and generous, fully franked dividend yield (at 4.27% today), Coles is a great foundation for any retirement portfolio.
Telstra Group Ltd (ASX: TLS)
I like Telstra for our retirement portfolio for similar reasons to Coles. It has a hefty fully-franked dividend for one, which the company recently upped to an annual 17 cents per share (4.5% yield today). But Telstra is also an extremely defensive stock with a stable earnings base.
It would take more than an average recession for most people to ditch their mobile plans and home internet access after all. Telstra has some of the country's best telecommunications infrastructure, which should serve the company and its shareholders well for decades to come.
National Australia Bank Ltd (ASX: NAB)
We couldn't have a passive income-generating ASX share portfolio without at least one ASX bank.
My pick of the bunch today is NAB. I view NAB as having a higher-quality business than its rivals Westpac Banking Corp (ASX: WBC) and ANZ Group Holdings Ltd (ASX: ANZ) thanks to its focus on business banking. That's while trading on a far more reasonable valuation to Commonwealth Bank of Australia (ASX: CBA).
As such, I think adding NAB's current dividend yield of 5.53% to our portfolio is a no-brainer.
Washington H. Soul Pattinson and Co Ltd (ASX: SOL)
ASX 200 investing house Soul Patts is next up. I'd recommend this company to a retiree for its 23-year and counting streak of raising its annual dividends alone. But Soul Patts brings even more to the table. It has a vast and diversified portfolio of different assets of its own. These include private credit, unlisted assets such as swimming centres and retirement villages, as well as a massive portfolio of ASX shares.
Soul Patts has been delivering market-beating returns for its shareholders for decades, and I don't see why that won't continue going forward.
Transurban Group (ASX: TCL)
Even if you haven't heard of Transurban, chances are you've used one of this company's numerous toll roads. Transurban is a toll road operator with major arterial routes in Brisbane, Melbourne and Sydney. In the latter city's case, this company owns almost every tolled road there is.
Many of Transurban's toll contracts allow the company to raise its toll prices by at least the rate of inflation. Given population growth demographics and this inherent inflation protection, Transurban offers pleasing earnings stability and dividend opportunities. Thus making it a great share for a retiree to bank on.
MFF Capital Investments Ltd (ASX: MFF)
This one isn't as famous a name as most of the other companies on this list. But the listed investment company MFF Capital is one of my favourite ASX investments. It's a company that runs a portfolio of quality US shares (including Visa, Mastercard and Amazon) on behalf of its ASX owners.
MFF is operated by Chris Mackay, who is one of the co-founders of Magellan Financial Group Ltd (ASX: MFG). Mackay has a considerable portion of his own wealth tied up in MFF, which gives me a lot of confidence in its future. For some international diversification of our portfolio, I think MFF is a great choice.
Lottery Corporation Ltd (ASX: TLC)
Lottery Corp is one of the newer shares on the ASX 200. But I've warmed to this company's defensive qualities and monopolistic traits since its ASX debut in May last year. Lottery Corp holds exclusive licenses to run lotteries and Keno in most Australian states and territories, with some of these licenses only expiring in the 2050s. This gives the company a highly predictable and defensive earning base that should grow steadily over time.
Lottery Corp is still finding its feet with its dividend policy and is yielding around 3% today. But I expect this yield to grow over time, and thus reckon Lottery Corp shares are a great bet as our final share in a retirement-focused ASX stock portfolio.
