Why I’m buying these 2 FTSE 100 shares for retirement

These two FTSE 100 stocks are at the top of my list when considering the financial options that will provide me with stability 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.

There’s a lot of uncertainty in the world right now, but I still need to plan for retirement. I think these FTSE 100 stocks might be my best path towards comfort later in life. 

My retirement plan is two-pronged: first, I want to invest in a high-growth stock that I can buy now and watch the gains tick over. And I also want a safe dividend-payer that can provide passive income and security.

So as I ponder that future deckchair on a porch somewhere with an iced tea in hand, I’m thinking of JD Sports Fashion (LSE: JD) and GlaxoSmithKline (LSE: GSK). 

JD Sports Fashion

My “wildcard” bet is a bit riskier than the average retirement stock. Retail is undergoing a significant shift to e-commerce and competition is fierce. However, JD Sports’ share price has soared more than 75% in the past year, from 512p to 907p.

This kind of growth intrigues me, so I began digging into this FTSE 100 company’s financials. 2020 revenue rose just under 1% to £6.16bn, despite temporary store closures. Even with increased Covid-19 costs, it managed to score a pre-tax profit of £421.3m — down just 5% year-on-year. What excites me for the future is that 55% of the company’s total sales worldwide came from the US and mainland Europe in 2020. This shows a strong international presence that can be built upon. I think JD can become one of the top sports retailers on the planet, and has plenty of growth in it yet.

I still have some concerns though. While the risks of it are waning, I’m worried about the impact of a prolonged pandemic. Or worse, another pandemic in the future — I’m not planning on retiring any time soon, after all. An increase in direct-to-consumer sales from major brands could also hurt JD. With retail e-commerce accelerating rapidly, consumers may simply go straight to Nike or Adidas rather than shop at JD. Hopefully, there will be enough market share to go around though and JD did do every well in e-commerce in its latest year. 

GlaxoSmithKline 

Despite being one of the FTSE 100’s worst-performing shares over a year, GlaxoSmithKline is on my retirement watch list too. At its current price of 1,350p, this pharmaceutical giant is down more than 10% in the past 12 months. The FTSE 100 member is a dividend-paying stock, with a yield of 5.7%, which means passive income in my later years.

While GSK missed out on last year’s pharma rally, this was a one-off in my opinion. its dip was partly due to its regular vaccines business suffering during lockdown as people stayed away from doctors’ surgeries. The group’s turnaround is making progress. Sales of new pharmaceuticals rose by 12% to £2.5bn in Q3, accounting for 30% of all revenue. Glaxo also remained very profitable, with an operating margin of 22%. As the sixth-largest pharma company in the world, I believe GSK can remain at the top and provide my retirement with a passive income stream.

GSK is far from risk-free though, with many changes on the horizon. It plans to split in two in 2022 (the two ‘new’ businesses will focus on BioPharma and Consumer Healthcare), which may dent earnings. Its dividend is also set to fall for the first time in 15 years, which could hurt my retirement plans. This corporate restructuring could have mixed results and may lead to worse returns.

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.

Jamie Adams has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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

1 FTSE dividend stock I’d put 100% of my money into for passive income!

If I could invest in just one stock to generate a regular passive income stream, I'd choose this FTSE 100…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Forecasts are down, but I see a bright future for FTSE 100 dividend stocks

Cash forecasts for UK dividend stocks are falling... time to panic! Actually, no. I reckon the future has never looked…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Down 13% in April, AIM stock YouGov now looks like a top-notch bargain

YouGov is an AIM stock that has fallen into potential bargain territory. Its vast quantity of data sets it up…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Beating the S&P 500? I’d buy this FTSE 250 stock for my Stocks and Shares ISA

Beating the S&P 500's tricky, but Paul Summers is optimistic on this FTSE 250 stock's ability to deliver based on…

Read more »

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Investing Articles

2 spectacular passive income stocks I’d feel confident going all in on

While it's true that diversification is key when it comes to safe and reliable investing, these two passive income stocks…

Read more »

Investing Articles

The easyJet share price is taking off. I think it could soar!

The easyJet share price is having a very good day. Paul Summers takes a look at the latest trading update…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

9 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

As the Rentokil share price dips on Q1 news, I ask if it’s time to buy

The Rentokil Initial share price has disappointed investors in the past 12 months. Could this be the year we get…

Read more »