Since the best returns available on a Cash ISA are currently around 1.5%, buying FTSE 100 dividend shares could prove to be a shrewd move.
In many cases, it is possible to double, or even treble, your passive income when compared to Cash ISA rates.
With interest rates set to remain at their current level, or even fall, over the next few years, now could be a good time to buy these two large-cap income shares. They appear to have sound strategies that could produce capital growth alongside their income returns.
With a 3.1% dividend yield, AstraZeneca (LSE: AZN) may not be among the highest-yielding shares in the FTSE 100. However, the pharmaceutical company’s dividend growth prospects could make it a sound income opportunity for the long run.
Its recent updates have shown that its pipeline has improved dramatically in recent years after an ambitious investment programme. This could position the company for growth in a world where demographic challenges may catalyse demand for a wide range of healthcare products and services.
AstraZeneca’s defensive business model may prove to be attractive to many investors during what is a period of significant economic and political risk.
Furthermore, with its dividend expected to be covered 1.3 times by net profit in the current year, there seems to be scope for its shareholder payouts to rise at a brisk pace. This could lead to a strong and dependable passive income stream for its investors that catalyses its share price over the long run.
Real estate investment trust (REIT) British Land (LSE: BLND) is a very different investment proposition than AstraZeneca. The property company is facing a period of disruption across much of its asset base, with demand for retail units expected to come under pressure over the medium term as online shopping becomes increasingly popular.
This could cause rents to decline, which may put the company’s dividend growth rate under a degree of pressure. However, with British Land shifting its focus away from retail and towards faster-growing areas such as flexible office space, it seems to have a sound strategy that could lead to improving financial performance in the long run.
Furthermore, investors appear to have factored in the risks facing the business. It trades on a price-to-book (P/B) ratio of just 0.6, while its dividend yield of 5.4% is among the highest yields currently available in the FTSE 100.
Certainly, British Land may prove to be a relatively risky stock to own in the short run, as it aims to transition towards assets that have greater growth potential. For long-term income investors, now could be the right time to buy a slice of the business based on its high income return and wide margin of safety. It could offer high total returns in the coming years.
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Peter Stephens owns shares of AstraZeneca and British Land Co. The Motley Fool UK has recommended AstraZeneca and 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.