These FTSE 100 dividend stocks could be game-changers for retirement savers

Royston Wild zeroes in on two FTSE 100 (INDEXFTSE: UKX) income stocks that should guarantee you brilliant income in retirement.

| 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.

Thanks to its monster yields, Legal & General Group (LSE: LGEN) is a great income pick, regardless of whether you’re some way off from retirement or have already kicked off the work boots for good.

Whether or not the FTSE 100 insurance colossus faces any temporary earnings turbulence, investors can take heart from its brilliant balance sheet and thus still expect dividends to keep on growing. This is certainly the case this year with the number crunchers anticipating a 16.4p per share dividend for 2018 despite predictions of a slight earnings reversal. Legal & General’s cash-generative qualities are going from strength to strength, and consequently its Solvency II ratio rose to 193% for January-June from 186% a year earlier.

This year’s projected dividend, if realised, would mark an improvement from last year’s 15.35p reward and yields a staggering 6.4%.

And in the years ahead I am confident that the growing investment needs of Britain’s ageing population should underpin solid earnings growth at Legal & General, allowing it to keep its crown as a top-tier income stock.

A safer selection

The yields over at Diageo (LSE: DGE) are a lot less impressive. For the year to June 2019 City analysts are expecting a 69.5p per share dividend, resulting in a forward reading of 2.5%.

Diageo doesn’t only lag Legal & General in the yield stakes either. Indeed, there is no shortage of shares across the FTSE 100 that beat the drinks giant in this respect — Anglo American’s forward reading of 4.7% Centrica’s 5.8% and BT Group’s 6.9% are just a few of those that may be more appealing at first glance.

However, those relying on many of the FTSE 100’s big payers to make them a handsome little nest egg for retirement may well find themselves disappointed thanks to their shaky profit outlooks. In fact, the three I have mentioned above are in danger of having to slash the dividend in the near future, or in the case of Centrica, yet again!

Solid as a rock

This is not something that investors in Diageo have to worry about. The business has been raising the annual dividend for donkey’s years and is in great shape to meet current projections, the anticipated payout for fiscal 2019 covered 1.8 times by predicted earnings.

What’s more, the Johnnie Walker maker is actively seeking to keep coverage locked between this level and 2.2 times in the years ahead, giving shareholders terrific peace of mind.

And Diageo should have what it takes to keep profits and thus dividends moving skywards. As I noted last time out, the company’s labels are beloved all over the globe, and the huge sums it is investing in innovating and marketing its brands to help them retain their allure guarantees their ‘cash cow’ status.

The company might be expensive thanks to its prospective P/E ratio of 22 times. However, the might of Diageo’s product stable, and thus its ability to generate growing shareholder returns for many years to come makes it worthy of such a premium.

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.

Royston Wild 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

Investing Articles

A 25-year-old investing £100 a month in a Stocks and Shares ISA could have this much at 50…

Opening a Stocks and Shares ISA at a young age can be a masterstroke when it comes to building long-term…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Here’s why this FTSE 100 gem still looks a huge bargain to me despite a 94% rise this year

A stock can still have huge value even after a substantial rise in price. To find out if this is…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

Investing £3.33 into an ISA every day from 22 could result in a £60,000 passive income

Millions of Britons use the Stocks and Shares ISA as a way to build wealth and generate an income. However,…

Read more »

Investing Articles

2 resurgent cheap shares that could skyrocket in 2025

Cheap shares can take our portfolios to the next level. Here, Dr James Fox highlights two stocks that appear to…

Read more »

Investing Articles

How much does an investor need in a Stocks and Shares ISA to earn £1,000 a month in passive income?

A Stocks and Shares ISA's a valuable asset for investors. Not having to pay dividend tax can be a big…

Read more »

Investing Articles

9% dividend yield! Could buying this FTSE 250 stock earn me massive passive income?

Assura looks like an outstanding stock for dividend investors to consider. But is the 9% dividend yield the passive income…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Why I think this month could be critical for the Lloyds share price!

Our writer explains why he thinks the bank's 2024 results will have a significant impact on the short-term direction of…

Read more »

British Pennies on a Pound Note
Investing Articles

This former penny share has soared 168%. Is the best yet to come?

When Christopher Ruane saw a penny share as a potential bargain last year, he was spot on. So having not…

Read more »