If you’re looking for stocks to buy and stash away for a comfortable retirement, my perfect combination would be long-term reliability with good dividend yields. Here are three FTSE 100 picks, all of which have been members of the index since it started in 1984, and all with dividend yields of better than 5%.
Weed
Tobacco is a bit of a pariah product these days, but it generates big profits, and British American Tobacco (LSE: BATS) has been turning them into dividend handouts for its shareholders for decades.
Current forecasts indicate a very tasty dividend yield of 6.5% for the current year, rising to 6.9% in 2020. That would be well covered by earnings, which are still growing despite the drop in smoking in developed countries.
The increasing profitability appears to be down to two main factors; the popularity of smoking in the developing world, and the increasing move to higher-margin premium brands as smokers’ affluence rises.
The ethics of investing in the business are down to individual investors, but purely on a financial basis, I see British American shares on a forward P/E of only 10 as cheap.
Insurance
Despite the cyclical nature of the insurance business, Legal & General Group (LSE: LGEN) is one of my FTSE 100 favourites.
Though current forecasts suggest earnings growth slowing a bit, we’re still looking at healthy dividend cover. Legal & General’s progressive dividend policy will have seen the annual payment grow by 55% over five years if 2019 forecasts prove accurate, and that’s well ahead of inflation — and progressive inflation-beating annual rises can see your real-terms income growing very nicely over decades.
My colleague Royston Wild recently wrote of Legal & General’s impressive 2018 performance, despite tough industry headwinds, and that’s feeding through to the share price.
Legal & General shares have trounced the FTSE 100 over the past five years, with a 35% gain compared to the index’s 10%, and 2019 is off to a cracking start with the price up 25% so far.
Even with that, we’re still looking at P/E multiples of around nine and under, and that makes the shares a strong buy for me.
Property
Mention property these days, and many an investor will pull a sceptical face. After all, housebuilder prices are down, REITs are sluggish, and Brexit is going to lead to a property slump, isn’t it?
Landsec (LSE: LAND), formerly Land Securities, has seen its share price slump by 18% over the past five years. But the stock is edging ahead of the Footsie so far in 2019, with a 13% gain. And the low share price has made the company’s progressive dividends look even tastier.
Back in 2015, Landsec paid 34p per share for a yield of 2.5%. Four years on, for the year ended March 2019, the City is expecting a payment of 47p. That, combined with the depressed share price, puts the yield at 5.1% — and forecasts see that growing to 5.5% by 2021.
Landsec invests heavily in the commercial sector, with some prime London office space on its books, backed up by top quality shopping centres and retail parks across the UK.
When a sector is down, I reckon that’s when the quality companies come to the fore, and I rate Landsec as one of them.
