The interest rates available from Cash ISA accounts have been dire for years. So instead, I’d aim to compound my retirement pot by investing in solid-looking, dividend-paying shares.
Here are two that I like the look of right now, and I’d aim to buy a few of their shares and hold them for the long term while reinvesting the dividends back in along the way. Such compounding, along with the potential for the share prices to rise, could combine to deliver a decent investing outcome for me over time.
Energy
Gas and electricity supplier SSE (LSE: SSE) expects earnings to improve going forward after a couple of years of declines. We should find out more with the half-year results report due next week. But one positive move the firm made recently was to agree to sell its energy services business to Ovo Energy for £500m. The deal is scheduled for completion by early 2020 and possibly before then.
The unit had struggled to make a profit and SSE plans to use the sale proceeds to pay off some of its borrowings, which I reckon is a good move because there’s a lot of debt. But the company is in the process of shifting its focus and plans to concentrate on developing its renewable energy and network assets, along with businesses aligned with such core activities.
Meanwhile, with the share price near 1,259p, the anticipated dividend yield stands above 6% after being rebased down a bit. But from this level, I reckon there’s a fair chance that future dividends will grow as the company’s business become stronger. I think SSE shares are attractive right now.
Medical devices
The share price of medical device manufacturer Smith & Nephew (LSE: SN) has dropped back more than 15% over the past couple of months. The strengthening pound against the US dollar could be to blame because the company reports its financial figures in dollars. Nevertheless, at the end of October, the company released a positive trading update.
Chief financial officer Graham Baker said in the report that the company produced organic revenue growth of 4% in the third quarter of the year. Trading in the first nine months had good momentum and the directors tweaked up their guidance on revenue for 2019.
Despite the share price weakness, operationally there doesn’t appear to be much wrong at Smith & Nephew. Meanwhile, at the beginning of November, the new chief executive Roland Diggelmann took over, and I always see refreshed leadership as a potentially good thing in companies.
With the share price at 1671p, the earnings multiple for 2019 is just under 21 and the anticipated dividend yield is around 1.8%. That’s not a bargain valuation, but the company has a strong multi-year financial record, and I reckon growth looks set to continue.
