If I were retiring tomorrow, I’d consider buying these two dividend shares

For a more comfortable retirement, our writer’s strategy is focused on a portfolio of dividend shares. Here are two he’d be keen to add to his holdings.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With average life expectancy increasing, planning for a long retirement is becoming increasingly important. But if I had to suddenly retire tomorrow, I’d buy high-yield dividend shares.

Studies reveal the average UK retiree needs approximately £31,000 a year just to get by — and upwards of £43,000 to be comfortable. That’s more than double the average UK pensioner’s income currently.

I’ve already begun planning for this by building a portfolio of dividend stocks for passive income. For those who haven’t, it’s not too late. Even at a late stage, investing in the right stocks can secure a sufficient stream of additional income.

Should you invest £1,000 in Aviva right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aviva made the list?

See the 6 stocks

The FTSE 100 is full of high-quality dividend stocks that have stable cash flows and rising yields.

Here are two I’d buy if my retirement was imminent.

Aviva

Created with Highcharts 11.4.3Aviva Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Aviva (LSE: AV.) has delivered an impressive performance over the past year, gaining 27%. What’s more impressive, it has managed to maintain a yield above 7% since early 2023. And there’s been no interruption to dividends for over 20 years!

That makes it one of the most reliable dividend-payers in my opinion.

In its first half of 2024 results, revenue and earnings grew 11% and 63% respectively, with profit margins now at 5.7%. The growth was attributed to significant competitive gains in the home and motor insurance markets, where Aviva is already a leader.

The £242m acquisition of Probitas in July increased the firm’s exposure to specialist risk opportunities in the UK. All this helped drive the share price to a yearly high of 506p.

Yet even with the growth, it still looks like good value. It has a forward price-to-earnings (P/E) ratio of 10.5, below both the FTSE 100 and insurance industry averages.

Still, there’s no guarantee that will continue. Insurance is highly competitive and Aviva could lose its market share to the likes of Prudential or Legal & General. It’s also sensitive to economic tides which is evident from the price dips in 2000 and 2008. Such events can result in dividend cuts and short-term losses.

HSBC

Created with Highcharts 11.4.3HSBC Holdings PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

At 7%, HSBC (LSE: HSBA) has the highest dividend yield of any major bank in the UK and the seventh-highest overall. The £116bn bank benefits from a massive, diversified international customer base. This can help soften the blow from localised economic issues. That said, heavy exposure to Asia has put it at risk recently as the region’s property market struggles.

China has faced issues for several years but recently, they’ve spilt over into Hong Kong. As of 30 June, HSBC is reportedly exposed to $3.2bn worth of defaulted commercial real estate loans in the financial hub. That’s a six-fold increase from $576m in the previous six months. 

But like Aviva, it has a long history of dividend payments – which is of key importance. When retired, I don’t want to buy shares in a company only to have it cut dividends after a few years. That’s an ever present risk, recent examples being Vodafone and Burberry

Although HSBC has made some minor reductions during economic downturns, overall, it has a progressive dividend policy. This has led to annual growth of almost 3% for the past 15 years.

Should you invest £1,000 in Aviva right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aviva made the list?

See the 6 stocks

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.

Mark Hartley has positions in HSBC Holdings and Legal & General Group Plc. The Motley Fool UK has recommended Burberry Group Plc, HSBC Holdings, Prudential Plc, and Vodafone Group Public. 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.

We think earning passive income has never been easier

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!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

10% dividend yield! Here’s a FTSE 100 share to consider in April for passive income

This FTSE 100 stock just soared past the 10% yield mark, making it a potentially lucrative option for investors targeting…

Read more »

Young black woman using a mobile phone in a transport facility
Investing Articles

3 FTSE 100 safe haven stocks to consider as trade wars bite

I'm confident in the long-term outlook for the FTSE index of stocks. But these blue chips may protect investors from…

Read more »

Investing Articles

Here’s how Trump tariffs could hand us some top passive income bargains

As tariff terror grips the stock market, it's time for passive income investors to steel our nerves and look for…

Read more »

Investing Articles

These FTSE shares may offer some safety as Trump slaps tariffs on trading partners

FTSE shares moved lower on 3 April, after US President Donald Trump introduced hefty tariffs on its trading partners. These…

Read more »

Investing Articles

6.8% dividend yield! Consider these 2 ‘secret’ passive income stocks to target a £1,360 payday in 2025

Looking for ways to generate above-average dividend income? These lesser-bought income stocks are worth a close look.

Read more »

Elevated view over city of London skyline
Investing Articles

The M&G dividend yields over 10% — and could get higher!

Christopher Ruane explains why he's upbeat about the long-term outlook for the M&G dividend yield and would happily buy the…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

2 popular UK growth stocks I wouldn’t touch with a bargepole in today’s market

Buying growth stocks can deliver market-beating returns, but this FTSE 250 pair doesn't look like a convincing investment for our…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

10 FTSE shares falling today after President Trump’s tariffs bombshell!

Our writer explains why JD Sports Fashion from the FTSE 100 and a diverse bunch of other UK stocks are…

Read more »