Forget the cash ISA! I think these FTSE 100 dividend growth stocks could help you to retire early

These FTSE 100 (INDEXFTSE: UKX) income heroes could make you a fortune. Let’s take a look.

| 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.

I’m not going to spend time banging on about the dangers of leaving your hard-earned savings stranded in a low-yielding, inflation-battered cash ISA. There are plenty of articles out there from the Fool’s team of writers alone detailing why a reliance on such products is one of the biggest investment mistakes.

Quite simply, I’d rather dedicate my time to looking at two brilliant FTSE 100 income shares whose dividend yields blast past the sub-2% interest rates currently on offer from current cash ISAs. These are two shares whose growth and dividend prospects could allow you to enjoy an early retirement.

Big yields, brilliant value

The first of these Footsie heroes, ITV (LSE: ITV), isn’t having the best of times right now as the improvement in advertising revenues hasn’t gone as far as City brokers had hoped.

Thus earnings figures at the broadcaster have been downgraded since I last covered the firm, and profits are now expected to duck 3% in 2018 and 2% in 2019. A tentative bottom-line uptick had previously been projected for next year.

Still, I remain convinced that ITV has a very bright future ahead of it as it builds its position as a truly global programme-making powerhouse. Its audience share in Britain has been rising during the first nine months of 2018 and is likely to continue to do as the bulky investment it makes in ITV Studios to bring viewer-winning titles like Victoria and Endeavour continues.

Indeed, ITV has plans to grow total production hours to around 10,000 in its bid for world domination, but this is not the only place where it is splashing the cash. It is developing its on-demand ‘ITV Hub’ service with a view to eventually grabbing 30m subscribers. And the company is undertaking aggressive cost-cutting to finance these massive investments.

Consequently the number crunchers believe ITV will have the financial strength that it takes to keep dividends rising despite the likelihood of some medium-term earnings pressure. Last year’s 7.8p per share reward is anticipated to rise to 8p in 2018 before edging to 8.2p in 2019.

The business thus carries monumental yields of 5.3% for this year and 5.4% for next year. Combined with its dirt-cheap forward P/E ratio of 9.8 times, I reckon ITV is a scintillating big-cap bargain right now.

Another dividend master

Mondi (LSE: MNDI) is another FTSE 100 share that City brokers are expecting will keep hiking dividends for some time yet, resulting in more inflation-busting yields.

For 2018 the abacus bashers are expecting a 72 euro cents per share reward, a figure that creates a bulky 3.7% yield.  And the meter rises to 3.9% for 2019 thanks to the projected 77 cents payout. And what’s more, like ITV, Mondi can also be picked up for  next-to nothing, the packaging giant carrying a prospective P/E multiple of 11 times.

City brokers are forecasting earnings rises of 19% and 6% for 2018 and 2019 respectively to provide the bedrock for these dividend rises. And they can be forgiven for being optimistic following the Footsie firm’s announcement last week that underlying EBITDA rose 30% from July to September thanks to the impact of improving selling prices.

And the growing supply and demand imbalance in Mondi’s markets convinces me that the business can continue to generate solid earnings (and thus dividend) progression long into the future.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

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

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

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

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »