Don’t rely on the State Pension. These dependable dividend stocks should help you retire in comfort

Paul Summers picks out two stocks he’d buy to supplement the meagre state payout.

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Right now, the State Pension pays out just £8,546.20 per year (or £164.35 per week). I think it’s fair to say that most people will be wanting a lot more than that in order to feel that they’re living a comfortable retirement.

In my opinion, dividend stocks are a great way of supplementing any income you regularly receive, whether it be from a job or, as far as retirees are concerned, from the government.

Today, I’ll be looking at two great examples. They might not offer the biggest payouts, but the relative security of their earnings should mean that they are less likely than other listed companies to cancel or cut their bi-annual cash returns to shareholders.

Drink in the dividends 

When it comes to identifying companies that should pay their owners whatever the economic weather, Britvic must be way up there.

Even if you don’t know much about the Hemel Hempstead-based business, it’s quite possible that you enjoy its brands, which include Robinsons, J20 and R Whites. It also has exclusive agreements with Pepsico to make and distribute favourites like Pepsi MAX, Gatorade and 7UP.

July’s encouraging trading update gave an indication of just how useful having this range of products is for Britvic.

Q3 revenue increased 3.4% to just under £367m, thanks to particularly strong sales of its non-carbonated and sugar-free drinks. Importantly, this rise was achieved despite the shortage of carbon dioxide in the UK and Ireland, meaning that the company was unable to take full advantage of the great weather that hit these shores over the reporting period. 

And while the full consequences of the sugar tax probably won’t be known until the end of the year, Britvic appears confident that its increasing shift to low- or no-sugar products should ensure any impact on business will be fairly minimal. 

Available for less than 14 times forecast 2018/19 earnings, I think the mid-cap is a defensive dividend delight. The stock should yield 3.6% next year, with payouts fully covered by profits. 

Boxing clever

Another dependable dividend stock to supplement the state payout is warehouse supplier Tritax Big Box (LSE: BBOX).  

As I’m sure you know, the retail industry has endured massive structural change over recent years with a whole host of high street firms struggling to compete against nimble online peers. This has led many such as Next, Argos and B&Q to flock to the FTSE 250 constituent for space in order to boost their operational efficiency. 

In short, the company’s ‘boxes’ have become a necessity for protecting profits. Even our looming departure from the EU and the fall in sterling (making imports more expensive) isn’t impacting on demand, according to Chairman Richard Jewson.

Tritax isn’t looking to rest on its laurels either, having already signalled its intention to continue adding assets to its portfolio. Right now, analysts are forecasting a 5.6% rise in earnings per share next year, leaving its stock on a P/E of 20.

That might look a bit expensive but I’d certainly buy Tritax for its stability and diversified group of tenants ahead of any single retailer trading at an initially cheap-looking valuation. 

And then there’s the dividends. A total payout of 6.71p per share is expected in 2018 — equating to a yield of 4.5% at the current share price. In 2019, the former is expected to grow by another 4% to 6.97p.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. The Motley Fool UK has recommended Tritax Big Box REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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