If you’re thinking about investing in dividend stocks for retirement, you’re not alone. Thousands of Britons are doing just that, aiming to achieve a steady stream of income to supplement their state pensions.

The question is where and how do we start? Many novice investors feel overwhelmed by the sheer number of options available. For many, a lack of clarity and understanding leads to fear of losses, and they give up.

But with careful planning, patience, and commitment, risks can be reduced and rewards improved.

Balanced approach

As with everything in life, choosing the perfect dividend portfolio requires careful moderation. It may seem logical to choose all stocks with a 10% return, until half of them temporarily stop paying dividends to finance debt.

It’s wise to pick all the stocks with the longest payout history – but the average return can be disappointing. Anything less than 4% barely beats a standard savings account.

A smarter choice might be to mix some high-yielding companies with some reliable dividend champions – those with track records over time. An average return of 7% is realistic, and would require £285,700 to pay £20,000 a year in passive income.

A 40-year-old investing £300 a month could reach that amount by age 65 (with dividends reinvested).

Identify profit gems

A typical investment portfolio includes between 10 and 20 stocks from a variety of sectors and regions. When it comes to dividends, some of the most popular sectors are finance, utilities, real estate, energy, and consumer staples.

Here are two diversified UK dividend stocks to consider, each complementing a retirement portfolio in its own way.

Legal and general (LSE: LGEN) has long been the top choice for UK retirement portfolios, offering a combination of high yield and structural attractiveness. The company operates in life insurance, annuities and asset management – ​​sectors directly linked to retirement savings and long-term demographic trends such as an aging population.

The main attraction, of course, is predictable, earnings-focused cash generation. With a business model centered around pension risk transfer and workplace retirement solutions, it enjoys recurring revenue streams that are largely insulated from short-term economic cycles. This close relationship with retirement planning makes it a natural fit for income-focused investors.

The combination of high yield (9%+) and reliable track record makes it a rare find – but still vulnerable to interest rate sensitivity. As an insurance and annuities company, its profitability and solvency depend heavily on interest rate movements.

In contrast, National network It offers a much lower yield but benefits from more defensive, inflation-linked income. As a regulated supplier of electricity and gas, its profits are determined on a multi-year basis. This gives it a long-term view of cash flows, supporting a dividend policy that grows in line with UK inflation.

Bottom line

When choosing dividend stocks, consider balancing yield with sustainability, as high yields can reflect market concerns about the safety of dividends. Diversification across multiple dividend sectors helps manage risk while maintaining steady income streams.

The above options are just two examples of how to balance productivity and sustainability. There are a range of similar attractive dividend stocks in the UK to choose from on FTSE 100 index and FTSE 250 index. One of the hardest steps is getting started – and then it just takes committed monthly contributions and a great deal of patience.