2 cash-cow dividend stocks for a retirement millionaire

Since flotation in 2013, Royal Mail Group(LSE: RMG) shares have put in a disappointing performance. Despite an early rise, with the shares at 439p today, we're looking at an overall 3.5% loss. Dividends paid since 2014 will have compensated somewhat, but early investors will have done well to break even after dealing costs.

But it's that combination of a fallen share price and progressive dividends that make me think Royal Mail is an attractive buy for long-term income right now.

Full-year results released Thursday show a 25% rise in pre-tax profit to £335m, and a forecast-beating 7% rise in earnings per share to 44.1p. That enabled the company to lift its dividend by 4% to 23p, and what's nice about it is the dividend is staying ahead of inflation which is nudging 3% these days. Oh, and that's a tasty yield of 5.3% on yesterday's close, and appears adequately covered by earnings.

Parcels abound

Although the increasing demise of the written word has led to a 6% drop in letters carried over the year, online shopping has helped compensate, with Royal Mail enjoying a 3% rise in parcel volumes. And though the parcels business is competitive, Royal Mail still carries around 50% of the UK's volume these days.

It's not just UK deliveries either, with the company's General Logistics Systems (which serves 41 European countries and seven US states) seeing a 9% rise in revenue -- it accounts for 22% of revenues now.

The shares ticked up a couple of percent this morning, but we're still looking at a forward P/E of a modest 11 (and that's before any upwards re-rating of forecasts, which I think is likely).

The market has punished Royal Mail shares over the past 12 months. But I reckon the market is wrong, and I'm seeing a nice opportunity to snag a healthy dividend stream for the long term.

Cows mean cash

Wallace isn't the only one who likes a bit of cheese -- according to the British Cheese Board, as a nation we consume around 700,000 tonnes of the stuff per year. And Dairy Crest Group(LSE: DCG) gets a fair chunk of that market with its popular Cathedral City cheddar.

The Dairy Crest share price dropped a little in morning trading Thursday, after earnings per share came in slightly behind forecasts at 35.6p per share, in the first year since the company disposed of its actual dairies to concentrate on its consumer brands.

Adjusted pre-tax profit was up 5% to £60.6m, with volumes from Cathedral City, and also from the firm's Country Life, Clover and Frylight brands all climbing. (Incidentally, Dairy Crest also makes Utterly Butterly, so it's not restricted to dairy products.)

Chief executive Mark Allen spoke of the company's industry-leading margins and its focus on building brand strength, and reckons Dairy Crest is "well positioned to deliver profitable, sustainable growth and stronger cash generation, underpinning our commitment to growing our dividends and reducing debt."

The full-year dividend was lifted by 2% to 22.5p, for a yield of 3.7%, and I think that's pretty respectable with cover by earnings of 1.6 times. An increase in net debt of £20.8m to £249.8m does concern me a little, but it was down to one-offs and the company's strong cash generation should enable it to reduce that in the medium term.

I see Dairy Crest as a company that should provide steady cash for decades to come.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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