High-yield ASX shares can be precisely what some Aussie retiree portfolios need because they can produce passive income and, hopefully, grow their underlying profit over time.
Many investors have built up portfolios throughout their lives til they retire. What can we do with that nest egg?
In retirement, we want a certain level of cash flow each year, though that doesn't mean trying to find the maximum dividend yields. I'd want to build a portfolio of names that can pay a good level of dividends but also deliver dividend growth.
Not every company needs to have a high dividend yield, but adding high-yielders to a dividend portfolio can boost the overall portfolio's average yield.
Let's look at three high-yield ASX shares that I think could be well-suited for Aussie retirees.
It's possible one or more of these stocks may reduce their dividend in the next 12 months, but even with a cut, I believe the payouts of all three will still be very high.
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Shaver Shop Group Ltd (ASX: SSG)
Shaver Shop is one of the largest retailers of hair removal products in Australia and New Zealand.
The company has more than 120 stores in the two countries, selling electric shavers, clippers and trimmers, and wet shave items. It also sells products across oral care, hair care, massage, air treatment, and beauty categories — all products that most people consider essential these days.
This high-yield ASX share could be good for retirees because it has built a record of providing stable and growing dividends, assuming the profit allows.
It has grown its dividend every year since 2017, and its trailing grossed-up dividend yield is 11.9%.
Charter Hall Long WALE REIT (ASX: CLW)
This high-yield ASX share is a real estate investment trust (REIT) that owns a variety of properties across different sectors including distribution centres, pubs and bottle shops, telecommunication exchanges and service stations.
What links all of these properties together is that they have signed long rental contracts with tenants. At 31 December 2023, the business had a portfolio-weighted average lease expiry (WALE) of 10.8 years, giving investors plenty of visibility about the rental outlook.
Commercial property can be a good source of passive income. The rent steadily grows, with some contracts having rental increases linked to inflation and others with a fixed annual increase. However, higher debt costs are a short-term headwind for earnings and distributions.
In FY24, the high-yield ASX share is expected to pay a distribution per security of 26 cents, which is a distribution yield of 7.6%.
Metcash Ltd (ASX: MTS)
Metcash is a fairly diversified business. It supplies food and drinks retailers across the country, including IGA supermarkets, IGA Liquor, Bottle-O, Cellarbrations, and Porters Liquor. It also has a number of hardware businesses, including Mitre 10, Total Tools, and Home Timber & Hardware.
The company has committed to a dividend payout ratio of 70% of underlying net profit after tax (NPAT), enabling a solid dividend yield each year.
Australia's growing population is a useful tailwind for hardware and food earnings, which is good for the high-yield ASX share, in my opinion. According to Commsec, Metcash is expected to pay a grossed-up dividend yield of 8% in FY25.
