Relying solely on your State Pension in retirement could lead to significant disappointment. Not only does it currently amount to around a third of the average UK salary, the age at which it starts being paid is expected to rise over the next couple of decades. As such, obtaining a passive income from elsewhere in older age could become increasingly important to a rising number of people.
With that in mind, here are two FTSE 100 shares that appear to offer a favourable mix of growth potential, income appeal, and attractive valuations. They could be worth buying today and holding for the long run, having the potential to boost your retirement portfolio.
The recent results from insurance company RSA (LSE: RSA) highlighted the uncertain operating conditions the business faces in many of its markets. Despite this, it was able to increase underwriting profit by 70%, while making progress with a range of initiatives that are expected to enhance its position across a range of markets through improved customer service and lower costs.
Looking ahead, RSA is expected to post a rise in its bottom line of 22% this year, with a further increase in net profit of 16% forecast for next year. Despite such a strong growth outlook, the stock trades on a price-to-earnings growth (PEG) ratio of just 0.6. This could provide a wide margin of safety to new investors, as well as increase the potential for high returns in the long run.
The company’s dividend yield of 5% is covered 1.7 times by net profit. This could mean there’s scope for dividend growth over the medium term, thereby increasing its total return potential.
Another FTSE 100 stock that could offer high long-term returns is aerospace and defence business BAE (LSE: BA). Its recent results showed it’s on track to meet guidance for the full year, while it continues to invest across its range of operations to strengthen its competitive position.
The company could be negatively impacted by an uncertain economic outlook, as well as political risks among key customers such as Saudi Arabia. Nevertheless, growing demand for its products and services may offset an uncertain operating environment to produce improving financial performance over the coming years.
In fact, BAE is forecast to post a rise in net profit of 7% in the current year, followed by further growth of 6% next year. Since it trades on a price-to-earnings (P/E) ratio of 12, investors may have priced in the risks faced by the company at the present time.
While BAE may not be seen as an income stock by many investors, its relatively low share price means it currently yields 4.2%. As such, now could be the right time to buy a slice of the business for the long term.
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Peter Stephens owns shares of BAE Systems. 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.