Buying dividend stocks for a retirement portfolio has its challenges. On one hand, you want a decent level of income. On the other, you want a relatively low level of risk (many high-yield dividend stocks are quite risky).
The good news is that there are plenty of choices on the London Stock Exchange that are lower on the risk spectrum but also offer attractive dividend yields. Here are two to consider buying today.
A sleep-well-at-night stock
First up, we have National Grid (LSE: NG.), the electricity and gas company that operates in the UK and the US.
Utilities stocks are generally seen as ‘defensive’ investments. That’s because demand for electricity and gas tends to be pretty stable throughout the economic cycle. So they can be a good fit for retirement portfolios. With this kind of stock, investors don’t need to worry about revenues suddenly falling off a cliff.
As for the income potential here, the consensus dividend forecast for the year ending 31 March 2025 is 46.8p per share. At today’s share price, that translates to a yield of about 4.5%. That’s higher than most savings accounts are offering at present. Today, interest rates on savings accounts are declining due to the fact interest rates are heading lower.
It’s worth noting that National Grid plans to spend a lot of money on new renewable energy infrastructure in the years ahead. This buildout could negatively impact its profits and dividends. So as always, there’s no guarantee the stock will be a good long-term investment.
I think the stock’s worth a look at its current price and valuation however. At present, the forward-looking price-to-earnings (P/E) ratio here is 14.6. That’s not a bargain, but I think it’s a reasonable valuation.
The dividend here is rising fast
The other stock I want to highlight is Coca Cola HBC (LSE: CCH), the major bottling partner to soft drinks powerhouse Coca Cola.
I’m a big fan of this stock. If I didn’t already own shares in big brother Coca Cola, I’d snap it up for my own portfolio.
One thing I like about this business is that it benefits from Coke’s brand power. Coke remains one of the world’s most well known brands today and I can’t see demand for it dwindling any time soon.
Another thing I like is that dividends are rising fast. Over the last five years, the group has lifted its annual payout from 57 euro cents per share to 93 euro cents per year (growth of 63%). If the company was to continue increasing its payout, investors could be looking at a cash cow in the future. Already, the yield’s healthy at around 3%.
Of course, it’s possible that Coke could lose its appeal in the future. After all, consumer tastes and preferences are continually evolving. But with the stock trading on a very reasonable P/E ratio of 15, I like the risk/reward here. I reckon this dividend stock will do well in the long run.
