5.5% dividend yield! Shares like these could be great for my retirement

Oliver Rodzianko thinks this company with a stellar dividend yield could be very useful when looking for income from his investments. Here’s why.

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As an investor, I’m looking to build up my wealth. But from the outset, it’s important to mention that I’m not looking for passive income from a high dividend yield right now. As I’m still young, I’m more focused on high growth.

That said, I’m constantly educating myself on the best dividend-paying shares on the market. That’s because one day, I’ll look towards retirement. When that day comes, I think there’s no better way to pay my bills than through stable dividend-paying shares.

So, here’s a company I deem one of the top contenders for passive income in Britain right now.

Paying my bills

Telecom Plus (LSE:TEP) is a telecommunications and utilities company offering mobile, fixed-line, internet, gas and electricity services. So, if I became a shareholder, I could be paying my bills with income from the company that I’m paying.

All of the firm’s revenue comes from the UK. That’s one of the key risks with the investment I’ll get to later. However, it’s well diversified operationally, having almost 50% of its revenue from electricity, 42% from gas and the rest from landline and broadband, mobile and other services.

The yield for this investment is 5.6% at the moment, which is very healthy. To put that into perspective, if I saved up £500,000 in assets for retirement, putting that into Telecom Plus shares could provide me with £28,000 a year in dividends. I think if I’ve planned ahead and own a property outright by the time I retire, that’s more than enough to cover my yearly expenses.

Financial health

I like that the firm has a relatively strong balance sheet. It has more than double the amount of cash on its books compared to debt. I also like the fact that it has been growing its revenues at a 40% average annual growth rate for the past three years.

Such strong revenue growth and a healthy balance sheet make me think that the shares selling at 41% lower than their all-time high could be a massive opportunity for me.

Also, with a price-to-earnings ratio of just 13, I think the shares are significantly undervalued.

My big caveat

Now, a high-growth, good-value business might make me think it’s time to go all-in for the 5.6% yield. However, I feel this would be a bad idea.

One of the key tenets to successful investing and surviving in the stock market is to diversify well. I don’t have to own a hundred companies, but five-10 is better than one. Personally, I own around 15 in my portfolio.

What I want when I retire, ideally, is a range of high-dividend-paying shares that are spread around the globe and from different industries. If one market goes down, the others can prop up my returns.

As I mentioned earlier, all of Telecom’s revenue comes from Britain. So, what happens if the UK market crashes? My asset value and dividend income would likely deplete significantly with it.

It’s a top contender

I haven’t found many great British companies that offer long-term price growth prospects and a healthy passive income, but Telecom fits the bill.

Also, I do like the idea of paying my bills with income from my bill provider.

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.

Oliver Rodzianko has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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