Investing in retirement is all about balance. On one hand, you don’t want a portfolio full of highly volatile growth stocks that will result in sleepless nights. On the other hand, keeping all your money in a Cash ISA earning 1% probably isn’t the answer either, as you need your money to continue growing over time.
Are dividend stocks the ideal solution? With these kinds of stocks, you get cash income paid into your account on a regular basis, while you have the opportunity to generate capital gains over time too. With that in mind, here’s a look at three FTSE 100 dividend stocks that I think could suit retirees.
Despite the fact that smoking rates are declining across the world today, I continue to see investment appeal in tobacco manufacturer Imperial Brands (LSE: IMB). Smoking is not going to go away entirely any time soon, and as such, the group should be able to continue paying out dividends to shareholders.
In terms of dividend yield, Imperial offers a cracking yield of 8% right now. Often, when a yield is that high you have to be careful as it signals a dividend cut is coming. But I don’t see that happening here. Not only did the group just lift its dividend by 10%, but cash conversion remains strong and Imperial is also selling off assets to reduce debt. With the shares trading on a rock-bottom P/E ratio of 8.7, I see a lot of value here.
If a tobacco stock is not for you, take a look at healthcare giant GlaxoSmithKline (LSE: GSK). It specialises in pharmaceuticals, vaccines, and consumer healthcare products such as painkillers, so it’s definitely more of an ethical pick. The dividend yield here is currently around 5.2%.
One reason I like GSK shares is that the company appears well placed to benefit from the world’s ageing population. As we age, aches and pains tend to become more of a regular occurrence, and with the number of people aged 60 or over across the world set to rise significantly in the next 20 years, I can see demand for GSK painkillers Panadol, Voltaren, and Fenbid (sold in China) remaining robust.
GSK currently trades on a P/E ratio of 13.9, which I think is quite reasonable. In comparison, rival AstraZeneca trades on a P/E of 21.
Finally, I think that Reckitt Benckiser (LSE: RB) could be another top dividend stock for retirees. It’s the owner of a large number of health and hygiene brands including Dettol, Strepsils, and Nurofen. The yield here is not the highest in the FTSE 100 at around 3%, but the company does have an excellent dividend growth track record.
Reckitt Benckiser, in my view, is a classic ‘sleep-well-at-night’ type stock. It’s not going to set the world on fire. But what it is likely to do, is continually sell its well-known trusted products to consumers in over 200 countries and generate fairly stable revenues in the process, which is what you want as a retiree.
RB shares were trading above 8,000p in mid-2017, however since then they have declined to around 6,000p on concerns over the group’s strategy and growth. I see this pullback as an opportunity, and with the shares now trading on a P/E of 17, I think it’s a great time to be accumulating the stock.
Edward Sheldon owns shares in Imperial Brands, GlaxoSmithKline and Reckitt Benckiser. The Motley Fool has recommended AstraZeneca, GlaxoSmithKline and Imperial Brands. 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.