Retirement is something that’s on many people’s minds, whether it’s achieved by paying into pensions or winning the lottery. To that end, I’ve come up with two hot dividend stocks from which I could derive income when the time comes to retire. Let’s take a closer look.
An investment built to last
Barratt Developments (LSE:BDEV) paid a dividend of 29.4p per share for the year ended June 2021. At the current share price of 485p, this equates to a dividend yield of 6.09%. As an investor on the lookout for potential retirement income, I find this very attractive.
It’s worth noting, however, that dividend policies may be subject to change at a future date.
Dividend payments by the company were zero in 2020 as the pandemic hit the homebuilder’s operations. In previous years, however, payments were nearly double current levels.
The firm stated last month that it was on track to beat adjusted pre-tax profit expectations of just under £1.05bn. It forecasts this number to be more towards £1.06bn.
However, the cost-of-living crisis is draining money from the pockets of potential homeowners. And although interest rates are still historically low, they are rising.
Collectively, these factors could deter customers from taking on more debt to fund house purchases and may lead to a slowdown in the housing market, which would be bad news for Barratt Developments.
On the other hand, the business has total forward sales of £3.62bn, indicating that it might be able to weather any storms that arrive in the short term.
A stock wired up for the long term?
Vodafone’s (LSE:VOD) dividend yield currently stands at 6.25% and last year it paid a dividend of €0.09 per share. At the time of writing, the shares are trading at 121p.
For the three months to 30 June, the telecommunications firm reported that revenue increased 2.7% to €11.3bn. It also stated that it should meet full-year expectations and forecasts that cash flow will reach about €5.3bn.
Despite this, net debt is still high at around $72bn. As a potential investor, it’s essential to see the company addressing this debt pile.
Another threat is the increasing number of regulations in Germany, one of Vodafone’s main markets. These mean, for example, that customer contracts are not automatically extended when they expire. This could dent future balance sheets.
However, the business acquired Liberty Global in 2019. This has allowed Vodafone to grow in Central and Eastern Europe and has the potential to provide organic revenue growth in the coming years.
Overall, while there are threats to both of these companies, their dividends continue to be attractive, especially when I’m thinking about retirement. Additionally, they have exhibited growth in recent years. I’ll therefore add both firms to my long-term portfolio soon in the hope of benefiting from these dividend policies in my future retirement.
