With the return on a Cash ISA being around 1.5%, it continues to lag inflation. This could mean disappointment for savers, since the spending power of amounts invested in a Cash ISA may fall in real terms over the coming years.
By contrast, the FTSE 100 has a dividend yield of around 4%. However, it is possible to generate a higher yield which may rise with inflation over the long run. With that in mind, here are two FTSE 100 stocks that offer 5%+ dividend yields, as well as capital growth potential.
Despite the political uncertainty facing the UK at the present time, the United Utilities (LSE: UU) share price has risen sharply in recent months. In fact, it is up by 13% since the turn of the year, with investors becoming increasingly optimistic about a variety of companies that are focused on the UK.
Even though it has risen sharply of late, United Utilities still has a dividend yield of just over 5%. It has a solid track record of dividend growth, and could increase its future payments by at least as much as inflation.
Although there are risks from a potential nationalisation of the wider water services sector should there be a change in government, United Utilities seems to offer a wide margin of safety at the present time. Its price-to-earnings (P/E) ratio of 14.7 is relatively modest compared to its historic levels, and could indicate that there is a value investing opportunity on offer over the long term.
The commercial property sector has faced a difficult period over the last couple of years, with shares in stocks such as Landsec (LSE: LAND) coming under pressure. Even though it has gained 16% since the start of 2019, it still trades on a price-to-book (P/B) ratio of 0.7. This suggests that it offers excellent value for money, since it could rise by 50% and still only trade at net asset value.
Clearly, there is scope for a fall in commercial property prices in London and across the UK. Brexit risks may not feel as pressing as they did a few weeks ago. However, there remains a deadline for later this year when talks need to be finalised, and this may mean that investment in the property sector remains at a low level throughout 2019.
With Landsec having a dividend yield of 5.3%, it could deliver an impressive total return even over the short run. Since the commercial property industry moves in cycles, now could be a good time to buy into it while it trades at a low ebb. While potentially risky depending on how the UK economy performs, the company appears to have a solid asset base, a sound strategy and a wide margin of safety which together may drive its share price higher.
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Peter Stephens owns shares of Landsec. The Motley Fool UK has recommended Landsec. 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.