These superb FTSE 100 dividend yields could help create generational wealth

When I invest in the FTSE 100, I’m not only thinking of cash for my own retirement. I want to leave as much for the kids as I can too.

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What do I mean by generational wealth? I’m talking about building up enough cash to keep ourselves happy in retirement, and still have some to hand down to our ill-deserving offspring when we pop our clogs. But why FTSE 100 stocks?

Well, the top London index has delivered average annual returns of 8% since it was launched in 1984. Stick that in your Cash ISA!

Compounded up over 30 years, that’s enough to turn a monthly £500 investment into more than a quarter of a million pounds.

Should you invest £1,000 in Compass Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Compass Group Plc made the list?

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Long-term winner

I bought shares in insurer Aviva (LSE: AV.) myself. The Aviva share price has had a few ups and downs, but that can happen with any company. It’s why I only buy shares as part of a diversified Stocks and Shares ISA.

Created with Highcharts 11.4.3Aviva Plc PriceZoom1M3M6MYTD1Y5Y10YALL6 Apr 20202 Apr 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '252021202120222022202320232024202420252025200300400500600www.fool.co.uk

I’d expect the dividend to be volatile too, as the insurance business tends to go through cycles. It can have a few years of very good profits and cash flow, then hit a downturn at the drop of a hat.

To me that really makes the sector even more of a long-term-only one. I’d say an absolute minimum of 10 years, but ideally for life.

But right now, we’re looking at a forward yield of 6.9%.

And forecasts for Aviva show the dividend growing strongly in the next couple of years.

Finance stock cash

I like other stocks in the insurance sector too, including Legal & General with a forecast 8.9% dividend yield, and Phoenix Group Holdings at 9.8%.

I also can’t leave the financial sector without a peek at the banks. Thanks to recent share price gains, the Lloyds Banking Group dividend is down to 4.7%.

But at HSBC Holdings, we still see a 7.3% yield. There’s global and Chinese risk with HSBC, but I still like it, providing the diversification is there too.

I also can’t ignore British American Tobacco with its 9.2% yield. I won’t buy it myself, for ethical reasons, and the whole business faces long-term risk. But I can’t fault anyone who wants to snag a bit of that cash for their grandchildren.

Maybe the best?

I’ve got this far without mentioning National Grid (LSE: NG.), which might just be the best FTSE 100 income stock ever. What am I thinking?

Even the best can bring unexpected risk, though. And a look at the chart shows how the stock slumped at the end of May when the firm announced its big rights issue…

Created with Highcharts 11.4.3National Grid Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Still, the forecast dividend yield is up at 6%. And National Grid is in the fortunate position of having an effective monopoly on its business.

That business is regulated, mind. And that means the firm doesn’t have full control over what it does and how it uses its shareholders’ money.

But I still think I really should buy some, especially after this drop. As it happens, one of the next generation in my family already has some.

A start

Anyway, that’s just a start, with a few ideas of FTSE 100 stocks that I might buy with my grandchildren in mind. Do your own research, Fools. And teach your children well.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Compass Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Compass Group Plc made the list?

See the 6 stocks

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.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Alan Oscroft has positions in Aviva Plc and Lloyds Banking Group Plc. The Motley Fool UK has recommended British American Tobacco P.l.c., HSBC Holdings, and Lloyds Banking 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.

Like buying £1 for 51p

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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