Since the State Pension currently amounts to just £8,767 per annum, generating a passive income in retirement is very important to many people. As such, building a portfolio of FTSE 100 shares could be a good idea, since they may be able to provide capital growth prior to retirement that boosts the size of your nest egg.
With that in mind, here are two large-cap shares that appear to offer favourable long-term growth outlooks. They could be worth buying today while they trade on relatively attractive valuations.
Unilever’s (LSE: ULVR) recent sales update was disappointing. It showed that the company is now expecting to report sales growth for 2019 that is slightly lower than previous guidance, although its profitability is not expected to be affected.
The slowdown in sales growth has been caused by challenges in some of the company’s key markets in Africa and Asia. Although Unilever expects its performance to improve in the coming quarters, it could experience a period of slower growth in the meantime.
The sales update has negatively impacted the company’s share price. It now trades on a price-to-earnings (P/E) ratio of 20. This is significantly lower than its recent rating, and suggests that the stock could offer better value for money than it has done for some time.
As such, now could be the right time to buy a slice of the business. It has long-term growth potential from a large exposure to emerging markets. Although its near-term capital appreciation potential may be limited by uncertain operating conditions, its long-term investment potential seems to be high.
British American Tobacco
Another FTSE 100 share that has experienced uncertainty in 2019 is British American Tobacco (LSE: BATS). The threat of regulatory change in the US, which is a key market for the business, could have a negative impact on the sales performance of its next-generation products such as e-cigarettes.
They are expected to be a cornerstone of the company’s long-term growth prospects, and a disappointing performance from them at a time when cigarette volumes are declining may cause investor sentiment to weaken.
However, this risk appears to have been factored into British American Tobacco’s share price. It currently trades on a P/E ratio of just 10, which suggests that it offers a wide margin of safety.
Furthermore, it is forecast to post a rise in its bottom line of 6% in the next financial year. This suggests that its strategy of becoming more efficient, reducing debt and investing in next-generation products could pay off.
Therefore, it may be a relatively unpopular stock in the near term due to the regulatory risks it faces. But British American Tobacco could deliver high total returns in the long run that boost your retirement savings prospects and help you to beat the State Pension.
Peter Stephens owns shares of British American Tobacco and Unilever. The Motley Fool UK owns shares of and has recommended Unilever. 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.