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Selecting dividend stocks for a retirement portfolio has its challenges. This is due to the fact that many high-yield shares carry a level of increased risk, potentially jeopardising your capital.
The good news is that there are plenty of high-quality UK stocks that are lower on the risk spectrum but still offer healthy dividend yields. Here are two to consider buying today.
A resilient consumer stock
First up, we have Unilever (LSE: ULVR). It’s the owner of Dove, Domestos, Knorr, and dozens of other well-known, trusted brands.
This stock’s more defensive than most due to the fact that a lot of its products are relatively recession-resistant (people still buy deodorant and cleaning products in a recession). So I think it’s well suited to those seeking capital preservation.
Meanwhile, it offers a solid dividend yield. Currently, it’s about 3.3%. Of course, that’s not the highest yield out there. However, investors should note that this company has a great track record when it comes to annual dividend increases.
And rising income is what you want in retirement. This can help to offset inflation (the rising prices of goods and services over time).
It’s worth pointing out that this company also has plenty of long-term growth potential. That’s because it generates a lot of its sales in the world’s emerging markets (India, China, Indonesia, etc) – where incomes are rising rapidly.
Additionally, it has a new CEO, Fernando Fernandez, who’s focused on generating growth. He plans to unlock value by doubling down on ‘premiumisation’, which he sees as a driver of volume growth and profit margin expansion.
Now, one risk here is the emergence of new consumer brands. Thanks to social media, it’s never been easier for new brands to capture market share.
I like the risk/reward proposition however. I think this stock has the potential to deliver solid returns in the years ahead.
A healthy level of income
Another UK stock I see as well suited to a retirement portfolio is National Grid (LSE: NG.). It’s a leading electricity and gas company that has operations both in the UK and the US.
Like Unilever, this stock’s quite defensive in nature. In an economic downturn, people still need electricity and gas. This defensive nature can be seen in its share price. While many stocks have taken a hit this year due to the high level of economic uncertainty, National Grid’s share price is up year to date.
As for the dividend yield, it’s quite attractive. For the financial year ending 31 March 2026, the expected payout is 47.1p per share, which translates to a yield of around 4.5% (a higher return than most savings accounts are paying today).
Now, National Grid’s hoping that a major clean energy infrastructure investment plan will boost growth in the years ahead. However, this does present a risk. Any setbacks here could potentially threaten earnings, dividends, and the share price. So this is something to monitor.
Overall though, I think this stock’s a good fit for a retirement portfolio. With a 4.5% yield, I see the potential for decent overall returns in the long run.
