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2 FTSE 100 income champions I’d buy to retire on

Reckitt Benckiser Group (LSE: RB) shares have dropped back over the past two years, though they had previously reached P/E valuations in the twenties. There have been concerns over its pharmaceuticals business, though some of the high valuation would surely have been as a result of a ‘flight to safety’ triggered by a few tumultuous stock market years, so it’s arguable that it was a deserved correction.

Solid record

Nevertheless, the shares are actually still up 27% over the past five years, while the FTSE 100 has managed a meagre 8% — and Reckitt Benckiser has been reporting steady earnings gains and lifting its dividend every year.

We’re looking at forecast dividend yields of around the 3% mark, so not among the biggest, but with such a great track record of progressive rises I rate Reckitt Benckiser as a long-term dividend champion.

According to chief executive Rakesh Kapoor, “Q1 saw a slow start to the year, especially in OTC.” But he went on to say that “we expect to see improving growth in the remainder of the year, particularly in H2.”

E-commerce

A key point for me is that e-commerce is making inroads, up 25% in the first quarter and now accounting for 10% of revenue in the firm’s health business.

The City is expecting a modest EPS improvement of 2% this year, and though it’s still early, Reckitt Benckiser says it’s on course to meet full-year targets. The firm’s outlook for like-for-like revenue growth is put at 3%-4%, with adjusted operating margins expected to remain stable.

For a retirement portfolio, I see shares like Reckitt Benckiser’s as ideal for forming a bedrock of very safe companies with dependable long-term dividend income streams.

Wealth

Investment manager Schroders (LSE: SDR) is another I see as a good long-term income provider, and it is also off to a decent start in 2019.

At the end of the first quarter, total assets under management were up 4.2% to £424.4bn, comprising a 4% rise to £377.9bn in the firm’s Asset Management business itself, and a 6.4% jump in Wealth Management to £46.5bn.

The dividend should be flat this year, with a small boost predicted for 2020, providing well-covered yields of 4.2% and 4.3% respectively. Though that doesn’t represent any rise this year, the dividend has still soared from 78p per share in 2014 to 114p last year, and 46% in just four years is not to be sniffed at.

The Schroders share price has been volatile over the past five years, and that can happen with fund managers — their shares can climb and fall disproportionately as stock market sentiment waxes and wanes. That resulted in a bit of a disaster in 2018, with a loss of 30%.

Low valuation

But it left the shares on a P/E multiple of only 11.3 at the end of the year, which looks very much like a bottom-of-the-cycle valuation to me.

In December, my colleague Rupert Hargreaves named Schroders as one of the FTSE 100 dividend stocks he’d buy before 2019. That’s turned out to be a bit of astute timing, as the Schroders share price has soared by 30% so far this year. And we’re still looking at what I consider undemanding P/E valuations of around 13.

While Schroders’ volatility might put off some investors who are already retired, I’m certainly seeing a stock I’d buy to build a retirement portfolio.

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Alan Oscroft 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.