I transferred three legacy company and personal pensions into a self-invested personal pension (SIPP) earlier this year and since then I’ve had a lot of fun populating it with FTSE 100 stocks.
First, I gave myself a strong equity underpinning, by purchasing the Vanguard FTSE UK All-Share Index Unit Trust tracker and the Vanguard S&P 500 UCITS ETF. Then I spent some time researching individual stocks that I reckon can generate a market-beating return.
So far, I’ve bought seven. I deliberately chose established dividend-paying blue-chips that have performed poorly recently, and were trading at low valuations as a result.
I’ve been on a spree
Better still, because their share prices had fallen, their yields had soared. Often to very high levels. This was the case with my first pick, wealth manager M&G, which now yields a stunning 10.13%. I like the stock so much I’ve bought it twice, and may buy more.
Volatile stock markets have hit M&G’s net assets under management and customer inflows, but I think that’s likely to reverse when the stock market finally recovers. That may take longer than I originally hoped, but no matter. I’ve already reinvested my first dividend and I’m looking forward to earning plenty more.
I’ve also bought insurer and asset manager Legal & General Group twice. It yields a mighty 9.04% and trades at a dirt cheap 5.6 times earnings. L&G is profitable and should also benefit when stock markets pick up.
And I’ve doubled dipped with Lloyds Banking Group, which yields 5.6% today but could pay more than 7% in its 2024 year. It’s also cheap at 5.8 times earnings.
Housebuilder Taylor Wimpey is out of favour as the UK housing market wobbles. I think it’s 8.27% yield is slightly more precarious as a result. However, trading at six times earnings I couldn’t resist buying it. Twice (again).
I’ve only bought mining giant Glencore once but I might go back for more because today’s valuation of just 3.88 times earnings looks unmissable. As does the forecast yield of 8.6%.
They’ve dipped in recent weeks
Again, that isn’t guaranteed because the troubled Chinese economy could hit commodity demand and prices. Yet the risks appear to be priced in given Glencore’s low, low valuation.
My final two FTSE 100 picks had a slightly different profile. I bought consumer goods giant Unilever for its defensive qualities, rather than sky-high yield. I also think it has bags of comeback potential after a bumpy few years. Again, I may have to be patient.
Finally, I bought packaging giant Smurfit Kappa Group, as I felt it offered growth potential as well as a solid 4.5% yield.
Lloyds, L&G, M&G and Taylor Wimpey were all climbing nicely until the recent dip. However, since I plan to hold them for a decade or two I can give them plenty of time to prove their worth. If they fall further, I’ll buy more.
My only concern is Smurfit Kappa, as markets have taken a dim view of its planned US acquisition, which I didn’t know about when I bought it. I think it will pay off, but as ever when buying shares, there are no guarantees. But I’m happy with my SIPP stock picks and hungry to buy more.