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3 FTSE 100 stocks yielding 6% I’d buy and hold for 10 years

If you’re looking for income stocks to retire on, then I don’t think you need to look any further than the UK’s leading blue-chip index, the FTSE 100. Right now, there are plenty of attractive opportunities in this index. Today I’m going to outline three of my favourites. 

Lifetime income

My first pick is Phoenix Group (LSE: PHNX). Over the past few years, this company has grown into one of the largest life insurance businesses in the UK, mostly through acquisitions. Its biggest deal so far was the £3.2bn acquisition of Standard Life Aberdeen’s insurance arm, which is already yielding fantastic returns.

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Management had initially expected to generate £720m of synergies from the deal, but now this target has been hiked to £1.2bn. It’s also predicting £3.8bn of cash generation between 2019 and 2023.

This cash generation should easily cover Phoenix’s dividends to investors over the time frame. At the time of writing, the stock supports a dividend yield of 6.3%, far above the FTSE 100 average of 4.3% and, with cash generation increasing, it looks as if this distribution is here to stay.

On top of this attractive level of income, shares in Phoenix are also dealing at the EV/EBITDA ratio of 4.1, below the market average of 11.2.

Turn around play

My next pick is WPP (LSE: WPP). Even though it specialises in producing marketing plans for global companies, WPP has struggled to market itself over the past 12 months. Management turmoil and falling earnings have resulted in an investor exodus.

However, I believe the stock has been oversold. It’s currently dealing at a forward P/E of just 9.6 which, considering current City growth projections, looks cheap. The City has pencilled in a decline in earnings per share of 4.6% for 2019, although analysts are expecting growth to return in 2020.

And while you wait for a recovery, the stock supports a dividend yield of 6.2%, which is covered 1.7 times by earnings per share. Considering all of the above, I think it’s worth investing in this marketing giant as it starts its recovery process. Although the market seems to be assuming the worst if growth returns, I reckon there could be bigger returns for shareholders from here.

Direct profits 

The final company I’m going to profile is Direct Line (LSE: DLG). The UK car insurance market is fiercely competitive, but Direct Line is one of the largest in the space and, as a result, is well positioned to hold its own in the market, in my opinion.

That said, the one thing the firm can’t control is the rising cost of claims, which is hitting profits across the home and car insurance market across the UK. Rising costs will push earnings per share lower by 16% in 2019, according to the City.

This isn’t ideal, but Direct Line’s strong balance sheet means it’s well positioned to weather these headwinds. The strong balance sheet also means the company can afford to return the majority of its profits to investors.

Indeed, even though they’re predicting a decline in earnings this year, analysts have pencilled in a prospective dividend yield for the company of 8.3%, making it one of the most attractive income stocks in the FTSE 100. I think it’s worth making the most of this opportunity while it lasts.

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Rupert Hargreaves owns shares in Standard Life Aberdeen. 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.

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