I’m searching for the best FTSE 100 stocks to build generational wealth. Have I found them?

Investing in UK shares on the FTSE 100 can help parents pass down a significant chunk of cash to their children and grandchildren.

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There are various ways to pass on generational wealth, from a property or business to art and antiques. But I think one of the most profitable methods is investing in the FTSE 100

The index has provided average annual returns of 8% since it was formed back in 1984. Its smaller cousin, the FTSE 250, has even better returns of 11% but is less well-established. When it comes to building such wealth, it’s important to think long term. That means digging out the stocks that have not only a strong past — but hopefully a strong future.

Stocks are usually chosen for either their dividends or growth but I aim to get the best of both worlds. With that in mind, I think these two FTSE stalwarts could fit the bill.

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The dividend hero

Spirax Group (LSE: SPX) is a centuries-old British manufacturer of steam management systems. Since starting life in 1888, it’s expanded to 60 countries worldwide. Steam may sound like an outdated industry but I was surprised to find the market for steam traps is expected to double by 2030. They’re used in almost all forms of industrial facilities that vent air (basically, all of them.)

At first glance, the low 1.8% yield doesn’t look like a good option for dividends. But it has a solid history of dividend growth that speaks volumes to its reliable performance. Companies that go through periods of volatility or low earnings tend to cut or reduce dividends. Since the turn of the millennium, Spirax’s annual dividend has grown uninterrupted from 18p to 160p. Even when the share price suffered losses in 2022, the company kept increasing dividends. 

Speaking of the share price, it’s down almost 50% since late 2021. Ouch! That doesn’t sound like a wealth machine. 

Created with Highcharts 11.4.3Spirax Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

But when in doubt, zoom out.

In the 20 preceding years, it grew over 4,000%, providing annualised returns of 20% per year. The crash came as a result of the post-pandemic recession that hit two of its biggest markets — biopharmacy and semiconductors. This reveals the increased risk exposure it has to certain industries.

But with markets looking up, could Spirax begin a new period of growth? Of course, there’s no guarantee, but in my opinion, it has long-term potential. That’s why it’s on my buying list for July.

The growth giant

InterContinental Hotels Group (LSE: IHG) has been delivering exceptional returns to shareholders since the early 2000s. It’s up 951% since July 2004, providing annualised returns of 12.5%. Naturally, being a hotel group, it suffered losses during Covid. But the recovery has been swift and exceptional. 

In fact, it’s grown almost twice as fast in the four years since Covid than the four before it.

Created with Highcharts 11.4.3InterContinental Hotels Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

That’s lucky because the company is drowning in borrowings. With liabilities that outweigh assets, it has negative equity and $3.2bn of debt. Fortunately, it’s well covered by cash flow and earnings before interest tax (EBIT) are 13.7 times higher than the interest payments.

Furthermore, it faces stiff competition from rivals Marriot and Hilton — not to mention the growth in private property rental apps like Airbnb.

Still, I think the price performance speaks for itself. It’s a wildly popular brand that seems to be going from strength to strength, so I’ll buy some shares next month.

Of course, there are plenty of other passive income opportunities to explore. And these may be even more lucrative:

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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.

Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended Airbnb and InterContinental Hotels Group Plc. 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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