These 2 FTSE 100 stocks could give you a comfortable retirement

Your retirement portfolio could benefit significantly from these FTSE 100 (INDEXFTSE: UKX) stocks.

| 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.

There are not many companies that can claim Brexit is already helping them win business. BAE Systems (LSE: BA) might not be stating this publicly, but over the past few months, the company has emerged as a front-runner for the success story of Brexit Britain.

At the end of June, it was revealed that BAE had beaten Italian and Spanish rivals to win a £20bn contract to build Australia‘s new fleet of warships over 30 years. The company is also likely to be instrumental in helping the UK government develop a new next-generation fighter jet — a commitment by policymakers to ensure Britain retains its cutting-edge combat expertise after Brexit.

Details on the air combat strategy are expected to released this week at the Farnborough Airshow.

Ships and planes are only part of BAE’s arsenal. The company is also a world leader in cybersecurity, a market that is seeing rapid growth around the world.

In other words, BAE is well positioned for growth over the next few decades. And I believe the company’s potential makes it the perfect pick for any retirement portfolio.

Long-term focus 

Unlike most companies, BAE tends to sign multi-decade development and maintenance contracts with its customers. Primarily because competitors cannot access its intellectual property. Warren Buffett always mentions a company’s ‘moat’ when talking about its investment potential, and thanks to its intellectual property, BAE’s ‘moat’ is both wide and deep.

With this being the case, I believe the stock’s current valuation of 14.8 times forward earnings is not that demanding, especially when analysts think EPS could jump 31% over the next two years.

Not only is the company on a growth trajectory, but the stock also supports a dividend yield of 3.4% with the distribution covered twice by EPS.

If you are looking for an income-growth stock to include in your retirement portfolio, BAE looks to me to be the perfect buy.

Return to growth 

Another company that I believe is well placed to churn out steady returns for investors over the long term is AstraZeneca (LSE: AZN).

With the company expected to return to growth in 2018, after five years of stagnation, investors have recently pushed shares in Astra to a new all-time high. This vote of confidence in a business is also a vote of confidence in management’s strategy to pursue the development of oncology treatments.

City analysts believe the launch of new treatments will help the company boost EPS by 53% in 2018 and then 16% in 2019 (to $3.87). Unfortunately, even after this growth, Astra’s earnings will still be below the high-water mark of $4.94 reached in 2012, but the return to growth is more symbolic for the group, which has been struggling to ignite revenue expansion since 2012 after it started to lose exclusivity over its flagship Crestor product.

A return to growth proves to investors and analysts that Astra is on the comeback trail. City analysts believe that some of the company’s cancer treatments currently under development could easily replace the lost sales from Crestor over the next few years. 

Considering these forecasts, even though the stock has recently hit a new all-time high, I believe there could be further gains on the horizon especially as the stock’s current valuation of 18.8 times 2019 earnings is below the sector average of 20.

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.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended AstraZeneca. 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

UK money in a Jar on a background
Investing Articles

With a 10.1% yield, should I buy this FTSE 250 income stock?

Our writer looks at an income stock that’s kept its dividend unchanged for five years. But is it high enough…

Read more »

Investing Articles

Up 23% in a month, can this FTSE 100 stock continue to soar?

Airtel Africa's recently been the FTSE 100’s top-performing stock. With huge opportunities for growth ahead, is it set to continue?

Read more »

Investing Articles

£20,000 in savings? Here’s how an investor could use it to target an eventual £980 of passive income each month

Our writer demonstrates how an investor could aim to earn close to £1,000 each month in passive income from a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

£10,000 invested in the S&P 500 at the start of 2025 is now worth…

Since the start of the year, the S&P 500's underperformed the FTSE 100. And Stephen Wright thinks investing in the…

Read more »

Investing Articles

Is this a turning point for the Diageo share price?

The Diageo share price is at an eight-year low. Is this FTSE 100 favourite simply too cheap to ignore? Roland…

Read more »

Investing Articles

As the FTSE 100 hits record highs, should I sell my shares and buy an index fund?

Our writer’s portfolio lagged the FTSE 100 last year, but he’s not giving up on stock-picking and highlights a recent…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

£10,000 invested in Lloyds shares 6 months ago is now worth…

Lloyds shares have performed well over 12 months but have broadly disappointed investors over the long run. Dr James Fox…

Read more »

Investing Articles

£20,000 in savings? Here’s how investors can aim for a £4,000 monthly second income

Millions of investors use the Stocks and Shares ISA as a vehicle to build wealth and generate a second income.…

Read more »