With the return on a Cash ISA being around 1.5%, it continues to lag inflation. This could mean disappointment for savers, since the spending power of amounts invested in a Cash ISA may fall in real terms over the coming years.
By contrast, the FTSE 100 has a dividend yield of around 4%. However, it is possible to generate a higher yield which may rise with inflation over the long run. With that in mind, here are two FTSE 100 stocks that offer 5%+ dividend yields, as well as capital growth potential.
United Utilities
Despite the political uncertainty facing the UK at the present time, the United Utilities (LSE: UU) share price has risen sharply in recent months. In fact, it is up by 13% since the turn of the year, with investors becoming increasingly optimistic about a variety of companies that are focused on the UK.
Even though it has risen sharply of late, United Utilities still has a dividend yield of just over 5%. It has a solid track record of dividend growth, and could increase its future payments by at least as much as inflation.
Although there are risks from a potential nationalisation of the wider water services sector should there be a change in government, United Utilities seems to offer a wide margin of safety at the present time. Its price-to-earnings (P/E) ratio of 14.7 is relatively modest compared to its historic levels, and could indicate that there is a value investing opportunity on offer over the long term.
Landsec
The commercial property sector has faced a difficult period over the last couple of years, with shares in stocks such as Landsec (LSE: LAND) coming under pressure. Even though it has gained 16% since the start of 2019, it still trades on a price-to-book (P/B) ratio of 0.7. This suggests that it offers excellent value for money, since it could rise by 50% and still only trade at net asset value.
Clearly, there is scope for a fall in commercial property prices in London and across the UK. Brexit risks may not feel as pressing as they did a few weeks ago. However, there remains a deadline for later this year when talks need to be finalised, and this may mean that investment in the property sector remains at a low level throughout 2019.
With Landsec having a dividend yield of 5.3%, it could deliver an impressive total return even over the short run. Since the commercial property industry moves in cycles, now could be a good time to buy into it while it trades at a low ebb. While potentially risky depending on how the UK economy performs, the company appears to have a solid asset base, a sound strategy and a wide margin of safety which together may drive its share price higher.
