Two top FTSE 100 dividend stocks that could pay you through your retirement

These FTSE 100 (INDEXFTSE: UKX) giants could be fantastic retirement holdings thanks to non-cyclical sales growth, high margins and whopping shareholder return programmes.

| 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.

Exciting growth stocks may garner most of the financial news headlines these days, but long-term investors who have been around the block know that a balanced retirement portfolio should contain not only sexy tech stocks but also dependable, non-cyclical stocks that can pay out hefty dividends year after year for decades to come.

As dependable as they come 

One near the top of my list in this category is consumer goods giant Unilever (LSE:ULVR). It’s true that other consumer goods firms such as Kraft and Procter & Gamble have run into trouble of late due to customers turning away from big brand name goods for trendier/cheaper options.

But Unilever has been impressively resilient in the face of this trend due to a high proportion of its sales coming from developing markets like Brazil, China and Indonesia, as well as a willingness to react positively to these fast-growing upstarts by purchasing them, as it did with Dollar Shave Club, or simply co-opting their ideas.

In the first half of 2018, these characteristics helped boost the group’s underlying sales by 2.7% year-on-year in constant currency terms. This is decent growth from a multi-billion-pound turnover business and means Unilever’s management is confident it will once again achieve annual sales growth of 3%-5%.

In addition to top line growth, management has been focused on margin improvements of late and in H1 increased underlying operating margins by 80 basis points to 18.6%, within striking distance of its 20% medium-term target.

Rising sales and margins are providing the company with the financial firepower to invest in long-term growth and richly reward shareholders. This means a rising dividend that currently yields a respectable 3%, as well as a massive €6bn share buyback programme that is half way completed after being announced in April.

All told, I think Unilever is a perfect retirement portfolio share to hold, with a management team focused on long-term growth that is fuelling increases to already impressive shareholder returns.

An under-appreciated growth and income star 

I view Experian (LSE: EXPN) in much the same light. The company’s massive competitive moat from it being the world’s largest credit bureau provides non-cyclical sales, high pricing power, and tremendous shareholder returns.

And far from being a low-growth business, it is constantly rolling out new services that utilise the records it has on hundreds of millions of people and businesses. In the first quarter of its financial year, these new services and strong demand for traditional offerings led to revenue rising 8% globally.

Looking ahead, there’s plenty of potential growth on the table for Experian as its core US division is still growing strongly with revenue up 11% in Q1 on top of expansion in growing markets like Latin America and Asia.

And with impressive and growing operating margins of 27.7% last year, the company is generating plenty of cash that can be returned to shareholders for many years to come. While the company’s headline dividend yield of 1.78% isn’t the most impressive that’s because management favours share buybacks with the $293m spent on dividend payments last year significantly less than the $581m spent on buybacks.

So, with a highly dependable business model that offers high growth, margins and shareholder returns, I reckon Experian could be a fantastic stock to put in a retirement account and hold for many years to come.

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.

Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Experian. 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

Mature couple at the beach
Investing Articles

6 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 »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »