2 FTSE 100 stocks that could help secure a comfortable retirement

Want to build a decent nest egg without needing to watch the markets on a daily basis? These look like two great options.

| 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.

Senior couple at the lake having a picnic

Image source: Getty Images

Despite dipping in early trading following the publication of its preliminary results for the full-year, drinks behemoth Diageo (LSE: DGE) remains a top pick for defensive investors with one eye on retirement, in my opinion.

Although fluctuations in trading are to be expected, its ownership of some of the most popular and recognisable tipples, including Guinness, Baileys and Johnnie Walker makes the possibility of a serious retreat in its share price far less likely than some of its peers in the FTSE 100.

It’s not like today’s numbers were even poor.

Cash-rich

At £12.2bn, reported net sales rose 0.9% over the 12 months to the end of June. Thanks to higher marketing costs being offset by productivity efficiencies, operating profit also rose by 3.7% to £3.7bn.

Although already perfectly respectable, it’s worth pointing out that currency headwinds were estimated to have impacted both of these figures by roughly £70m and £10m respectively.

Unsurprisingly, cash flow “continued to be strong” with the company generating £3.1bn in net cash and £2.5bn in free cash flow. As a result, Diageo joined fellow giant Royal Dutch Shell in announcing a new share buyback programme this morning — a move which will see up to £2bn returned to owners before the end of next June. This follows on from the £1.5bn given back over the last financial year.

In addition to this, Diageo’s management chose to hike the final dividend by 5%. At 65.3p per share, this gives a trailing yield of 2.25% for the year.

Looking ahead, CEO Ivan Menezes stated that expectations for Diageo’s mid-term performance hadn’t altered and that, through ongoing investment, mid-single-digit organic net sales growth was still predicted until the end of June 2019.

Diageo’s shares have been on rather decent form over the last year, rising 18% before today. A P/E of 24 looks dear but it could be argued that the company’s financial clout, high operating margins and geographical diversification justify such a valuation.

Since political and economic fragility won’t stop most people from consuming alcohol, I remain as bullish on Diageo’s long-term prospects as ever.

Dividend delight  

Another ‘buy and forget’ FTSE 100 stock that could help set up a comfortable retirement, in my opinion, would be insurance beast Aviva (LSE: AV). Given the competitiveness of the markets in which it operates, however, I would use its sizeable payouts to shareholders — and the assumption that these will be reinvested and returns thus compounded — to justify this view rather than anything else.

Based on the current share price and assuming expectations of a 9% hike prove accurate, Aviva’s stock is forecast to yield a mouthwatering 6.1% in the current year.

Things could get even better. With excellent free cash flow and a rock-solid balance sheet, I can see the company continuing to direct even more cash to its owners going forward.

This is, of course, based on recent trading conditions continuing and investors continuing to back CEO Mark Wilson’s desire to simplify operations at the £19bn cap. Back in March, the company declared that performance in the UK  — it’s biggest market — had “gone from strength to strength, growing sales, market share and profit“.  I can’t see any reason for things to have severely deteriorated over the last few months. 

Holders won’t have to wait long to find out. Aviva reports interim numbers to the market on 2 August. 

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 considered so you should consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. 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

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

1 dividend stock with a juicy yield to boost returns!

This Fool likes the look of this dividend stock to boost his passive income stream and explains why he would…

Read more »

Happy male couple looking at a laptop screen together
Investing Articles

Here’s 1 growth stock primed for long-term growth and returns!

Jabran Khan is hunting for a growth stock to boost his holdings. Could this financial advisory business be the right…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

3 FTSE 250 shares I bought for extra dividends

I plundered the FTSE 250 index to find these three cheap stocks with ailing share prices. All three firms pay…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’m buying cheap FTSE 100 stocks to boost my passive income!

Buying dividend stocks today could considerably improve the amount of passive income I make. Here are some FTSE 100 stocks…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Am I crazy for buying Royal Mail shares?

Royal Mail shares have collapsed by almost half in 2022. And with group profits falling and strike action under way,…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

2 recession-resistant stocks to buy right now

After the pandemic slump, we're now facing a UK recession. Many are looking for recession-resistant stocks to protect their money.

Read more »

Engineer Project Manager Talks With Scientist working on Computer
Investing Articles

This FTSE 100 stock continues to fall! Should I buy shares?

This Fool takes a closer look at a FTSE 100 quality assurance stock. As the shares continue to fall, is…

Read more »

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

Is the Rolls-Royce share price about to surge?

The Rolls-Royce share price continues to fall as market patience wears thin. But could it be on the brink of…

Read more »