Investing for retirement in your 50s is all about balance. On one hand, you want stocks that will rise over time and boost your retirement savings. On the other hand, you don’t want to be taking on too much risk. With your retirement at stake, now is not the time to be loading up on penny stocks.
With that in mind, if you’re over 50 and looking to build up your retirement pot, have a look at the two FTSE 100 dividend stocks below. I believe that both are well suited to investors in their 50s who are looking for long-term growth.
Alcoholic beverage manufacturer Diageo (LSE: DGE) – which owns a world-class portfolio of well-known brands including Johnnie Walker, Smirnoff, and Tanqueray – is pretty much the perfect buy-and-hold retirement stock, in my view.
For starters, it’s a ‘sleep-well-at-night’ stock. Consumers tend to drink alcohol during both the good times and the bad, which means that the company is relatively recession-proof. With Diageo, you don’t need to worry about a global recession (people often drink more during a recession).
Secondly, there’s an attractive long-term growth story. Diageo generates a substantial proportion of its sales from emerging markets and as wealth across these countries rises over the next few decades, more people (just the 750m or so) will be able to afford its products. This should lead to higher sales and profits.
Thirdly, the company is a highly reliable dividend payer. Not only has it paid a dividend every year since 1998, but it has also notched up 21 consecutive dividend increases now, which puts it in an elite group of dividend stocks. Currently, the yield on offer is around 2.3%.
Diageo rarely trades cheaply because it’s the stock that everyone wants to own. However, right now, it’s trading nearly 15% below its 52-week high on a P/E of 22.2. At that valuation, I think it’s a ‘buy’.
Another FTSE 100 dividend stock that I believe is well suited to those who are 50 or older is BAE Systems (LSE: BA) – a multinational defence and security business that helps to protect national security and keep critical information and infrastructure secure.
Now, BAE Systems is not quite as ‘defensive’ as Diageo as its revenues are linked to government defence budgets. These tend to fluctuate a little. However, in today’s volatile world, governments can’t afford to take defence and security lightly. As such, I think there’s a good chance that defence budgets will remain robust over the next decade to the benefit of the sector.
BAE is another very reliable dividend payer. Since paying its first dividend in 1999, the group has paid out one every single year and lifted its payout considerably along the way. Currently, the prospective yield on offer is almost 4%, which is certainly attractive in today’s low-interest-rate environment.
BAE Systems shares currently trade on a forward-looking P/E ratio of 12.9 which I feel is a very reasonable valuation for a company of its ilk. For those over 50, I think the stock could be a great buy-and-hold investment.
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Edward Sheldon owns shares in Diageo and BAE Systems. The Motley Fool UK has recommended Diageo. 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.