Retirement planning is the process of deciding retirement income goals and the decisions needed to accomplish them. This includes finding sources of income, executing a savings program, estimating expenses and managing risk and assets.
An easy rule of thumb says that one needs to replenish approximately 70% to 90% of pre-retirement income to run a decent retired life. This implies that if one is making $10,000 a month (before taxes), one might require $7,000 to $9,000 a month as retirement income to have the same standard of living than one had before retirement. For example, if someone plans to retire in next 20 years, then retirement planning would have to involve creating a system that generates $7,000-$9,000 per month income.
Why Is Retirement Planning Necessary?
- Medical Emergencies: Old age and health problems are often inevitable. Medical expenses take a huge proportion in the finances after the retirement;
- Inflation: Inflation is a universal fact and the value of dollar always decreases with the rise in inflation. A robust retirement plan prevents the adversities of inflation;
- No state sponsored pension: Generally private employees do not get pensions, so accumulating money is a vital need;
- Psychological Soundness: Retirement plan helps an individual to keep his or her head high and live full of dignity and respect.
Dividend stocks are considered as a great option for retirement planning. These stocks can help one hedge against rising inflation and give stable income in the long term.
Four good dividends stocks which one can consider for a robust portfolio are discussed below:
Amcor PLC (ASX: AMC)
Amcor PLC is a global leader in producing and developing responsible packaging for food and beverage, medical, pharmaceutical, home and personal care products.
Financial Highlights for FY19
The company reported solid performance for the year with good growth in various areas. Net sales saw an increase of 5.5% and adjusted net income increased by 9% – both in constant currency terms and YoY due to marked improvements in working capital.
The company’s adjusted cash flow after dividends stood at US$193 million. The company reported GAAP net income of $430.2 million and cash flow from operating activities stood at $776.1 million;
- Adjusted EBIT stood at $1,075.4 million, up 5.7% in constant currency terms;
- The company declared a total dividend of 45.5 cents per share for FY19.
Shareholders Value Creation (Source: Company Reports)
The stock of AMC closed the day’s trading at $14.700 per share on 15 November 2019, up by 0.47% from its previous closing price. The company has a market capitalisation of $23.7 billion and an annual dividend yield of 5.54%. The total outstanding shares of the company stood at 1.62 billion, and its 52-week low and high is $12.830 and $16.740, respectively. The stock has generated a total return of -3.37% and 10.79% in the time period of 3 months and 6 months, respectively.
Telstra Corporation Limited (ASX: TLS)
Telstra Corporation Limited is amongst Australia’s leading technology and telecommunication companies, offering a wide range of telecommunication and information services including mobiles, pay television and internet.
Highlights of AGM
FY19 was an important year for Telstra as it commenced T22 strategy to transform the company for the future. According to Chairman Mr John Mullen, with substantial progress, Telstra is a very different, much simpler and a more customer focused organisation than just a year ago:
- The company has reduced over 1,800 Consumer and Small Business plans to just 20 in market plans;
- It has eliminated excess data charges in Australia on new mobile plans;
- Since 2016, the number of calls coming into contact centres has dropped by over 15 million (annually), and goal is to reduce them by another 16 million by 2022, all driven by better customer experience;
- The company has achieved around $1.2 billion worth of annual cost reduction since FY16, with a further target of $630 million this year.
The shareholders of the company will receive a total dividend of 16 cents per share, combined with the total interim dividend paid in February 2019, returning $1.9 billion to shareholders.
The company indicated a 25% reduction in the total number of premises forecast to be connected during FY20 from 2 million to 1.5 million, as indicated by the NBN Co’s 2020 Corporate Plan.
The stock of TLS closed the day’s trading at $3.600 per share on 15 November 2019, up by 0.55% from its previous closing price. The company has a market capitalisation of $42.58 billion and an annual dividend yield of 2.79%. The total outstanding shares of the company stood at 11.89 billion, and its 52-week low and high is $2.663 and $3.978, respectively. The stock has generated returns of 1.99% and 4.61% in the time period of 1 months and 6 months, respectively.
Transurban Group (ASX: TCL)
Transurban Group is into the business of building and operation of toll roads in Sydney, Melbourne and Brisbane, Australia, as well as in the Greater Washington Area and Montreal in North America.
Company Refinances Its $1,650 Million Syndicated Bank Facility
The company has announced that the Transurban Group’s financing vehicle, Transurban Finance Company Pty Limited, has successfully refinanced its existing $1,650 million corporate syndicated bank debt facility. It comprises of two tranches of $825 million with time period of 3 and 5 years, respectively.
Commence Tolling on 395 Express Lanes
The company expects to commence tolling on the 395 Express Lanes on 17 November 2019. The 13-kilometre extension of the 95 Express Lanes to the Washington DC border will open on both schedule and budget.
The project consists of upgrades to transportation and traveller access at the Pentagon that opened to customers in June 2019. The 395 Express Lanes enlarges Transurban’s long-lasting collaboration with the Virginia government to provide and operate the 85-kilometre network of tolled lanes.
CEO Scott Charlton believes that the completion of the 395 Express Lanes project was a substantial development in Transurban’s network of operated lanes in the Greater Washington Area.
The stock of TCL closed the day’s trading at $15.130 per share on 15 November 2019, up by 0.79% from its previous closing price. The company has a market capitalisation of $41.02 billion as on 15 November 2019 and an annual dividend yield of 3.93%. The total outstanding shares of the company stood at 2.73 billion, and its 52-week low and high is $11.200 and $16.060, respectively. The stock has generated a total return of -0.53% and 9.64% in the time period of 3 months and 6 months, respectively.
Rural Funds Group (ASX: RFF)
Rural Funds Group Limited is engaged in the business of leasing agricultural equipment and properties.
Sale of Poultry Asset
RFM has entered into agreements for the sale of RFF’s 17 poultry farms to ProTen Investment Management Pty Ltd for $72 million.
- Eleven poultry farms have old infrastructure and grower agreements, with leases expiring FY24;
- Renewal of these contracts would require construction of new infrastructure, and therefore a material investment by RFF;
- Investment opportunities in natural resource intensive assets are more compelling;
- RFM concluded that continued investment in this sector is better suited to businesses with greater economies of scale.
Value of $10,000 invested in RFM Chicken Income Fund (Source: Company Reports)
The stock of RFF closed the day’s trading at $1.790 per share on 15 November 2019, up by 0.28% from its previous closing price. The company has a market capitalisation of $599.5 and an annual dividend yield of 5.9%. The total outstanding shares of the company stood at 335.86 million, and its 52-week low and high are $1.360 and $2.420, respectively. The stock has generated negative returns of 10.30% and 20.31% in the past 3 and 6 months, respectively.
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