2 top dividend stocks to consider buying for a retirement portfolio

These two dividend stocks could potentially offer those in or approaching retirement a nice mix of income and portfolio stability.

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Buying dividend stocks for a retirement portfolio has its challenges. On one hand, you want a decent level of income. On the other, you want a relatively low level of risk (many high-yield dividend stocks are quite risky).

The good news is that there are plenty of choices on the London Stock Exchange that are lower on the risk spectrum but also offer attractive dividend yields. Here are two to consider buying today.

A sleep-well-at-night stock

First up, we have National Grid (LSE: NG.), the electricity and gas company that operates in the UK and the US.

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Utilities stocks are generally seen as ‘defensive’ investments. That’s because demand for electricity and gas tends to be pretty stable throughout the economic cycle. So they can be a good fit for retirement portfolios. With this kind of stock, investors don’t need to worry about revenues suddenly falling off a cliff.

As for the income potential here, the consensus dividend forecast for the year ending 31 March 2025 is 46.8p per share. At today’s share price, that translates to a yield of about 4.5%. That’s higher than most savings accounts are offering at present. Today, interest rates on savings accounts are declining due to the fact interest rates are heading lower.

It’s worth noting that National Grid plans to spend a lot of money on new renewable energy infrastructure in the years ahead. This buildout could negatively impact its profits and dividends. So as always, there’s no guarantee the stock will be a good long-term investment.

I think the stock’s worth a look at its current price and valuation however. At present, the forward-looking price-to-earnings (P/E) ratio here is 14.6. That’s not a bargain, but I think it’s a reasonable valuation.

The dividend here is rising fast

The other stock I want to highlight is Coca Cola HBC (LSE: CCH), the major bottling partner to soft drinks powerhouse Coca Cola.

Created with Highcharts 11.4.3Coca-Cola Hbc Ag PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

I’m a big fan of this stock. If I didn’t already own shares in big brother Coca Cola, I’d snap it up for my own portfolio.

One thing I like about this business is that it benefits from Coke’s brand power. Coke remains one of the world’s most well known brands today and I can’t see demand for it dwindling any time soon.

Another thing I like is that dividends are rising fast. Over the last five years, the group has lifted its annual payout from 57 euro cents per share to 93 euro cents per year (growth of 63%). If the company was to continue increasing its payout, investors could be looking at a cash cow in the future. Already, the yield’s healthy at around 3%.

Of course, it’s possible that Coke could lose its appeal in the future. After all, consumer tastes and preferences are continually evolving. But with the stock trading on a very reasonable P/E ratio of 15, I like the risk/reward here. I reckon this dividend stock will do well in the long run.

Of course, there are plenty of other passive income opportunities to explore. And these may be even more lucrative:

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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.

Edward Sheldon has positions in Coca-Cola and London Stock Exchange Group Plc. 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

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