These 2 tasty dividend stocks could help fund your retirement

Steady and progressive dividends are what you want for a comfortable old age.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

British Land (LSE: BLND) shares have lost a bit of ground since late 2015 as a bit of pessimism has been creeping into the property market — and last year’s Brexit panic didn’t help. But that’s making me think they’re a tempting long-term buy right now, especially as nothing has changed regarding the UK’s chronic housing shortage.

Wednesday’s full-year results have strengthened that thought, with the property group reporting a 7.4% rise in underlying profit to £390m. A portfolio value fall of 1.4% doesn’t really bother me in the current climate, especially as the second half saw a 1.6% gain — overall it doesn’t really mean a lot.

The key for me is the dividend, raised by 3% to 29.2p for a yield of 4.4% on the current 659p share price. There’s also a 3% increase proposed for the 2017/18 year, which gives investors better visibility than most.

Beating inflation?

With inflation creeping up, a lift of 3% per year could well struggle to keep pace, but over the longer term I expect British Land’s dividend to grow modestly in real terms. And I think we’re likely to see some share price growth too — over the past five years we’ve had a 33% rise, and that’s an overall return of around 10% per year when added to dividends.

Chief executive Chris Grigg pointed out that markets were “stronger than many anticipated” following the EU referendum. I see Brexit as having no real long-term effect on British Land’s profitability, especially as the company appears sufficiently flexible in catering to changing demands — its portfolio is almost full with occupancy at an enviable 98%.

Cash cow

If you want an even bigger dividend, look no further than SSE (LSE: SSE), as the electricity and gas supplier has just lifted its full-year payout by 2.1% to 91.3p per share. That might not sound like a big jump (and it’s a bit below our current inflation level), but with the shares at 1,441p it represents a yield of 6.3%.

Adjusted earnings per share came in ahead of forecasts with a rise of 5.2%, providing dividend cover at 1.38 times. Cover is towards the top end of expectations, but next year it’s expected to fall to nearer the 1.2 times bottom end.

SSE has been buying back shares, with £131m returned via that route, together with a further £65m in April after the end of the year. That doesn’t seem to have made much difference to the share price, which has declined 2.5% over the past 12 months, but it should at least help counter the dilutive effect of offering scrip dividends.

Price cap risk

On the downside, SSE has attacked the energy price cap proposed by the Conservatives and suggests it could threaten its dividend in the future, saying it “would caution against potential unintended consequences … in what is a rapidly changing and increasingly competitive market.

And a nationalising Labour government winning the forthcoming election would be an even bigger risk. Jeremy Corbyn has already announced plans to take control of the water companies and the national grid, and the energy firms will presumably not be too far behind. But I reckon the chances of a Labour win this time are slim.

Even with these notes of caution, SSE’s yield is very big and is forecast to rise to 7% by 2019, and I’d see it as still attractive even at the 5% level.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »