Should you boost your State Pension with these dirt-cheap FTSE 100 dividend stocks?

Royston Wild discusses two FTSE 100 (INDEXFTSE: UKX) income shares that could help you in retirement.

| 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.

If you’re not squirrelling cash away to help finance your retirement then you’re setting yourself up for a pretty hard fall. With the age at which you can finally claim the benefit climbing, and Brexit throwing a further spanner in the works for all current and future retirees, it’s quite possible — nay, probable — that you’ll end up living on a miserly income without the aid of financial markets.

We here at The Motley Fool believe that the best way to create a handsome nestegg for retirement is by participating more specifically in stock investing. 2019 may present big challenges for share markets but there are still plenty of great stocks out there that have what it takes to make you a fortune now and in the years ahead.

A delicious dip-buying opp

One such company is FTSE 100 veteran BAE Systems (LSE: BA). The weapons builder has been on the defensive during the latter half of 2018, its market value shrinking almost 20% since the turn of June and which caused it to sink to levels not seen since November 2015. Investor nerves have been jingled particularly badly by the killing of Saudi journalist Jamal Khashoggi in October, allegedly by a hit squad from the desert kingdom in an act that has caused many to worry about future arms sales between the UK and its Middle Eastern ally.

This is of course a concern, but not one which merits the sort of sell-off we’ve seen of BAE Systems’s stock. As I noted last time out, the chances of an arms sales moratorium between the two nations remain extremely slim. And in my opinion, the Footsie firm’s low, low forward P/E ratio of 10.7 times fails to reflect this remoteness.

In actual fact I would consider that this cheap rating makes now a terrific time to buy into the defence giant. There will never be a time when BAE Systems’s broad range of weapons, cyber technologies and land, sea and air vehicles are no longer needed, so predictable is mankind’s need to fight wars. And the company’s strong relationship with the US and UK militaries puts it in the box seat to ride this theme.

Throw big dividend yields of 4.9% and 5.1% for 2018 and 2019 into the equation and I reckon BAE Systems is a great share to load up on.

The 6% yielder

Another FTSE 100 share I reckon could help you build big profits in the years ahead is TUI Travel (LSE: TUI).

Like the defence firm mentioned above, it trades on a bargain-basement prospective P/E multiple, in this case at 9.4 times predicted earnings. It also carries an inflation-stripping dividend yield, at 6.2% for the 12 months to September 2019.

I like TUI Travel given the rate at which it is grabbing customers, with numbers up 4.7% in the last fiscal year. As it builds its fleet of cruise ships, builds its new hotel pipeline and adds to its destination list I believe it remains in great shape to keep growing profits in the current year and beyond, too. I’d happily buy the travel titan today in expectation of lovely long-term returns.

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 no position in any of the shares mentioned. 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 »