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No savings at 50? This FTSE 100 5% dividend yield could still help you retire in luxury

Approaching planned retirement around 65 but with little in the way of savings? It’s a situation that millions of Britons find themselves in, whether due to a lack of financial planning, a lack of spare cash once all the bills are taken care of, or a combination of both.

Don’t panic, I say. No matter what stage of life you’re at, it’s still possible to make some decent returns on your money if you put it to work in the stock market, an investment arena where you can expect to make a return of up to 10% each year over the long term.

So let’s say that you’re 50 years of age. If you can squirrel away £650 per month into a Stocks and Shares ISA, with this rate of return it’s theoretically possible to have built a handsome pension pot of around £260,000 by the time you reach your mid-60s.

Fly high

It’s not cheap, sure, but history shows us that making that sort of money is a very achievable goal. By following a few choice rules – like not gambling with speculative/high-risk investments; opting for cheap shares that have a strong chance of rising in value; and buying shares that pay big dividends today – it’s certainly possible to make that sort of whopping return.

One such share from the FTSE 100 that can help you realise this target is International Consolidated Airlines Group (LSE: IAG).

The troubles of the airline industry are well documented amid a combination of higher fuel costs and intense ‘fare wars,’ and particularly so in the competitive short-haul market. But IAG’s size makes it better placed than many to weather the storm, and to enjoy the spoils of scores of its smaller rivals going out of business.

The long-term outlook for air travel remains robust and this blue chip is setting itself up to thrive in the fertile environment in the years ahead through ambitious expansion.

IAG, owner of British Airways, has had a number of potential acquisitions on its radar since its takeover of Aer Lingus four years ago and finally got its chequebook out again this week to buy continental carrier Air Europa at a cost of €1bn.

The Footsie firm describes its newest unit as “one of Spain’s biggest private airlines,” adding that the purchase “re-establishes IAG as a leader in the highly attractive Europe to Latin America and Caribbean market.” Air Europa will be combined with its Iberia brand in a move that IAG hopes will turn its Madrid hub into one of Europe’s largest.

Dividends taking off

Now City analysts expect IAG to report a rare earnings wobble in 2019, with an 11% drop currently being predicted as fuel cost pressures and recent pilot strikes weigh. It’s expected to fire back straight away through with a 7% bottom-line rise in 2020, though.

Make no mistake: IAG’s profits outlook over the long-term is extremely robust. It’s why brokers expect dividends to keep rising over the medium term, too, leaving IAG with inflation-smashing yields of 4.8% and 5.1% for 2019 and 2020 respectively.

It’s these sort of yields that make the flyer a great buy for those fiftysomethings with little or no savings in the bank. And given its low forward price-to-earnings ratio of 5.8 times, the company has a great chance of delivering some terrific share price growth over the next decade or so, too.

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Royston Wild has no position in any of the shares mentioned. 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.