One FTSE 100 income champion and one growth star that could help you retire early

The combination of income and growth from this FTSE 100 (INDEXFTSE: UKX) market leader and its peer could help you retire early.

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If you’re looking for somewhere to invest your money, the FTSE 100 is full of opportunities. Many of the index’s constituents offer dividend yields of 4% or more, which is significantly higher than you’d get from most high street savings accounts. 

With this in mind, today I’m looking at one FTSE 100 income champion as well as company that looks as if could soon become a leading growth play. 

Defensive income 

I believe the best dividend stocks are those companies with a defensive business model. AstraZeneca (LSE: AZN) is a great example. 

It’s one of the world’s biggest pharmaceutical companies and it’s also rapidly becoming a leading player in the world of cancer treatment (oncology). Indeed, after registering 40% sales growth from oncology products during the first half of 2018, the segment hit 30% of total group sales during the second quarter.

Growth isn’t expected to slow anytime soon. Astra has a broad range of new treatments still under development, including Lynparza (ovarian cancer) and Imfinzi (earlier-stage lung cancer). It has also received a number of product approvals already this year such as Lokelma, a treatment for hyperkalaemia. 

These new products are helping the group return to growth. Astra is expecting revenues to expand in 2018 for the first time since 2014, as new products pick up the slack from struggling legacy treatments. Total sales declined 1% during the first half of 2018, but a second quarter gain of 2% has helped restore confidence in meeting the full-year growth target. 

City analysts are expecting EPS growth of 54% to $3.4 per share (270p) for the full-year. Based on this outlook, analysts are also predicting a small increase in Astra’s dividend payout this year, although I’m sceptical management will raise the 210p per share distribution in 2018. It’s more likely payout growth will return next year, when the group is firmly back on a growth footing. 

Even though I don’t expect the dividend to rise in 2018, I’m still impressed by Astra’s 3.6% yield. With growth expected to pick up, I’m happy to buy at this level.

Blue sky growth 

A company I’d buy alongside Astra is Vectura (LSE: VEC). A specialist in the design and development of inhaled medicines, Vectura is sitting on a cache of valuable product data. Its most valuable data is the generic formulation of GlaxoSmithKline’s asthma and chronic obstructive pulmonary syndrome therapy Advair Diskus. 

The company did hope to have this generic product on the shelves this year, but the firm and its partner, Hikma, have struggled to receive approval from US regulators. They’ve returned to the drawing board and expect to come back with a new proposal next year. In the meantime, Vectura is still generating plenty of cash from its existing stable of treatments. 

These treatments will produce EPS of 3.7p in 2018, according to analysts. What I’m excited about is the potential for growth in the years ahead. If Vectura’s generic Advair is approved, analysts reckon EPS could jump 42% in 2019. That could be just the start. In the meantime, the group has nearly £100m in cash on its balance sheet. 

At present, the stock is trading at only 21 times forward earnings, slightly above the pharmaceutical sector average of 20. Personally, I believe this is a small premium worth paying for generic Advair’s blue sky potential.

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 shares in Vectura Group and GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca and Hikma Pharmaceuticals. 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.

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