Buying and holding dividend stocks is one way I could approach preparing for retirement. Hopefully in the years to come, I might generate income from them that would let me buy more shares. On top of that, over a long-term investing timeframe, I may also benefit from share price gains, depending on what stocks I buy.
Here are two such dividend stocks I would consider buying for my retirement portfolio today, if I had spare money to invest.
Legal & General
The first is financial services firm Legal & General (LSE: LGEN), which I have recently added to my portfolio. I like the economic characteristics of the general insurance industry in which Legal & General operates.
Demand is likely to stay strong and claim payouts tend to be fairly predictable over time. That helps firms price their policies profitably. I think Legal & General has an advantage in the industry, thanks to its well-recognised brands. That enables it to attract customers.
The company does more than just insurance, with a wide range of investment products also offering a potential boost to its profit streams. There are risks in this business too. An economic slowdown could lead to less people investing, hurting profits.
But with the long-term perspective of investing for retirement, I remain upbeat about the outlook for L&G. With its annual dividend yield of 8.1%, the firm offers me substantial passive income streams.
Vodafone
Another of the dividend stocks I would consider adding to my retirement portfolio is telecoms giant Vodafone (LSE: VOD). The company now trades for pennies, meaning its yield has been pushed up to 7.7%.
That share price fall reflects some risks the company faces. Its large debt pile could act as an increasing drag on earnings as interest rates increase. The high capital expenditure requirements of its industry are also an ongoing risk to profitability at Vodafone.
But the company has a large installed base across a wide range of markets, especially Europe and Africa. It has a strong position in many markets and a well-established brand that can help it attract and retain customers. I expect demand for mobile telecom and data services to keep growing over time. I see Vodafone as well-placed to benefit financially from that.
I’d like to buy both
If I had spare cash to invest, I would happily buy both of these dividend stocks for my retirement portfolio today. They offer meaty dividends. But although dividends are never guaranteed, I am hopeful these strong businesses could help support the payouts over time.
Crucially, I also expect ongoing strong demand for the services of both firms. That could mean they keep ringing up sales and profits far into the future. Hopefully that could help support future dividends.