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Building a second income? 3 FTSE 100 dividend stocks I’d buy and hold forever

A large part of my stock portfolio is invested in high yield stocks I plan to hold forever.

While I’m working full time, I’ll reinvest the dividends in more shares. When I start thinking about retirement, I plan to use the dividends to boost my income.

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In this article I’m going to take a look at three FTSE 100 high yield stocks I’d buy for a ‘forever’ income portfolio, including two I already own.

A long-term cash machine

My first stock is the only one I don’t own. Phoenix Group Holdings (LSE: PHNX) is a specialist insurer which buys and runs closed books of life insurance policies from other insurers. This £4.7bn firm is a bigger business than you might think, especially after the acquisition of the Standard Life insurance business last year.

The only reason I don’t own Phoenix is that I already have shares in two other insurers. Otherwise I’d certainly be a buyer. This firm’s focus is firmly on cash generation and shareholder returns. For example, in 2018 it generated £664m of cash, an almost identical result to 2017.

About half of this cash was returned to shareholders, while the remainder will be used to maintain a strong balance sheet and perhaps fund further acquisitions. A similar result is expected in 2019.

Phoenix shares offer a dividend yield of 7.1%, which looks sustainable to me. I’d be happy to buy at this level.

Advertising turnaround

I invested in advertising group WPP (LSE: WPP) a little while ago, after following events last year and studying the latest set of accounts. In my view, newish boss Mark Read has made solid progress with his turnaround plans so far. He’s cut debt and is streamlining the business to address the fragmentation and duplication from which it was suffering.

Although some critics have suggested his plans lack ambition, I’d rather see a straightforward job done well here. WPP isn’t broken, in my opinion, so expensive plans to fix it could make things worse.

As one of the world’s largest advertising and marketing groups, I reckon this business will stay relevant despite the growth of internet advertising.

WPP’s latest accounts show good levels of cash generation and suggest to me the dividend should survive without a cut. With the shares trading on 9.5 times forecast earnings and offering a 6.3% yield, I think now could be a good time to buy.

An unloved bargain?

When you’re buying high yield stocks, you sometimes have to buy shares that the market is selling. That’s certainly true of FTSE 100 landlord British Land (LSE: BLND), which I bought recently.

The firm’s recent results highlighted a 5% fall in the value of the group’s property portfolio and a 6.7% fall in underlying earnings. Investors took fright at British Land’s exposure to the retail sector and sold the stock.

I’m not too concerned. In my view, the BLND portfolio of prime London office property and top tier shopping centres will remain attractive to major landlords. The company highlighted this, pointing out that like-for-like rental growth of £15m more than offset the impact of £14m in lost rent from troubled retailers last year.

At 530p, British Land now trades at a 40% discount to its book value of 905p and offers a yield of 5.9%. I remain a buyer and may add to my position in the coming weeks.

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Roland Head owns shares of British Land Co and WPP. The Motley Fool UK has recommended British Land Co. 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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