Why I think the Lloyds share price could boost your retirement income as the State Pension age rises

Retirement saving and pension planning

With the State Pension amounting to just over £164 per week and the retirement age on the rise, income shares such as Lloyds(LSE: LLOY) could become increasingly important to retirees. Certainly, the company has experienced a disappointing period in terms of its share price performance. But with a relatively high yield, rising dividends and the prospect of an improving operating environment, the bank could offer high total returns.

Of course, it’s not the only stock that could offer improving income prospects. Reporting on Friday was a business which could generate exceptional income returns in the long run.

Improving performance

The company in question is the world’s largest independent cruise port operator, Global Ports Holding(LSE: GPH). It released a trading statement for the first nine months of the year, showing a rise in revenue of 3.5% at constant currency. The company has benefited from the steady performance of its cruise ports, as well as the strong performance of its commercial ports.

The business is on target to meet expectations for the full year, delivering progress in organic growth, as well as through inorganic growth. For example, it has signed concessions with Havana and Zadar already this year, also announcing a Memorandum of Understanding regarding port operations in Antigua and Barbuda.

With a dividend yield of around 8.6%, Global Ports Holding could offer impressive income investing potential. While it may lack the stability of some other high-yielding index peers, its performance so far this year seems to be relatively impressive.

Dividend growth potential

With the Lloyds share price having fallen in recent months, the stock now has a dividend yield that is approaching 6%. Its dividend payments are expected to rise by over 7% next year, and there is the potential for additional increases beyond 2019.

The bank could benefit from improving operating conditions. Interest rates are forecast to rise further next year, with additional growth expected in the coming years. This may create more favourable opportunities to deliver rising profitability, which could translate into a higher dividend.

The end of PPI claims may also ease the pressure on its financial performance. And since shareholder payouts are expected to be covered 2.2 times by profit this year, there appears to be significant scope for dividends to increase at a faster pace than earnings without putting the company under financial pressure.

Of course, the prospects for the UK economy remain uncertain in the short run. Brexit could cause confidence in the outlook for UK shares to decline, which may cause further falls in the Lloyds share price. However, with the stock having a relatively high yield, dividend growth potential and the prospect of a higher interest rate environment, its long-term outlook could be positive. As such, it may be worthy of consideration given the prospects for the State Pension age over the coming years.

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Peter Stephens owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. 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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