With the cost of living being high, many people will have no retirement savings at age 40. However, since they have many years left until retirement, there is still time to build a nest egg that can provide a generous passive income in older age.
The FTSE 100 may have experienced a strong year in 2019, but there are a wide range of companies that appear to offer good value for money. Here are two prime examples that could be worth buying today. They may help to bring your retirement date a step closer.
The exposure of Lloyds (LSE: LLOY) to the UK economy has contributed to its lacklustre share price performance over recent years. Investors have been cautious about the UK’s economic outlook during the Brexit period, and this could persist during 2020.
This presents a potential buying opportunity for long-term investors. Lloyds currently trades on a price-to-earnings (P/E) ratio of 9, which suggests that it offers a wide margin of safety. Furthermore, it has a dividend yield of 5.6%, which is covered twice by net profit. This could mean that it is able to generate strong total returns over the coming years.
Of course, the bank’s recent updates have shown that trading conditions are uncertain. Business and consumer confidence could be held back by Brexit negotiations in the next year. However, for investors who have a long time horizon, Lloyds could offer recovery potential as it removes additional costs from its business and invests in digital capabilities. As such, now could be the right time to buy it based on a favourable risk/reward ratio.
Another FTSE 100 share that has been held back by Brexit uncertainty is commercial property owner British Land (LSE: BLND). Along with many other property-related businesses, its shares have been relatively unpopular among investors in recent years. This has led to it trading on a price-to-book (P/B) ratio of just 0.7, which indicates that it could offer a wide margin of safety.
Alongside Brexit uncertainty, British Land is facing a changing operating outlook. Demand for its retail portfolio has declined, due in part to the growing popularity of e-commerce. This has led to a fundamental shift in the company’s strategy, with it investing in new growth areas such as build-to-rent residential properties and flexible office space. They could offer greater long-term profit potential than retail units, and may catalyse the company’s financial prospects.
The company also offers strong income potential as well as its share price recovery prospects. It has a dividend yield of over 5%, which has historically moved higher at a faster pace than inflation. Therefore, the stock is likely to have appeal for investors with a long time horizon. Its mix of income and value investing potential could improve your chances of building a nest egg and retiring early.
Peter Stephens owns shares of British Land Co and Lloyds Banking Group. The Motley Fool UK has recommended British Land Co and Lloyds Banking Group. 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.