Dividend stocks can be terrific for passive income investors. And that might be more important than ever. The latest data about retirement looks alarming, so it probably pays to start thinking about this sooner rather than later.
The pension problem
According to Pensions UK, a single person needs £32,700 a year to live a moderate retirement. For a couple, the figure is £45,400.
This goes up with inflation. But the organisation estimates that 77% of people are set to fall short of this. That’s huge. And the numbers are, obviously, worse in terms of being able to manage a ‘comfortable’ retirement.
This requires £45,400 for a single person and £62,700 for a couple. According to Pensions UK, only 9% of people are set to hit this.
Dividend stocks are one way to try and earn extra income. But how much do you need to invest to bridge the gap?
How much do you need to invest?
How much you need to invest to get to £32,700 a year depends on what you already have. But there are some ways to try and work it out
The average dividend yield from the FTSE 100 is around 3.04%. So a £20,000 investment returns £608 a year. That might sound like a lot. But when things go well dividends can increase over time.
This means income generated today has the potential to stay ahead of inflation. And that’s a huge advantage.
The downside is that dividends are never guaranteed. But there are some stocks with spectacular track records.
What to buy?
Long-term investors have to think about inflation. And one I stock I like in this context is Croda International (LSE:CRDA).
The conflict in Iran is having inflationary effects on a number of industries. But Croda said the following in its Q1 update:
“Sales in the Middle East accounted for ~5% of Group sales in 2025, most of which were in F&F. We are actively and responsibly managing the impact of the conflict, increasing prices to fully recover input cost inflation.”
This ability to offset input costs through price increases is hugely important. It’s why Croda has 34 years of consecutive dividend increases.
A 3.7% dividend yield with some protection from inflation looks pretty attractive. So what is this business and how does it work?
Inflation-busting
Croda’s a speciality chemicals company, making products that are used in things like drug development, crop protection, and beauty products.
The reason the firm’s able to keep increasing prices is that its products are well-protected. Part of this comes from more than 1,700 patents.
That, however, only goes so far. There’s always a risk someone comes with a better product – and then who wants to copy them anyway?
The real advantage comes from products that are specified by regulation. These can’t legally be substituted without getting the whole product re-approved. That means Croda’s customers can’t easily move to alternative products. And that’s why the firm can pass on higher costs through price increases.
Retirement income
I’ve been buying shares in Croda International recently with a view to holding them well into my retirement. That’s decades away, by the way.
No doubt there will be ups and downs. But the company has an admirable dividend record and I’m optimistic about the long term.
Should you invest £5,000 in Croda International Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Croda International Plc made the list?
Stephen Wright owns shares in Croda International.
