Since interest rates are expected to stay at low levels in the coming years, the income return on Cash ISAs could continue to lag inflation. As such, investors may be better off seeking an income from FTSE 100 shares. In many cases, they offer dividend growth alongside relatively attractive yields.
With that in mind, here are two large-cap shares that could offer long-term income investing potential. Buying them today could enable you to obtain a generous and growing passive income.
With a dividend yield of 2.8%, FTSE 100 pharma stock AstraZeneca (LSE: AZN) may not appear to be an attractive income share. After all, the FTSE 100 has a dividend yield of around 4.3% at the present time.
However, the company has experienced a difficult period that has led to it failing to offer rising dividends in recent years. And with its recent quarterly updates showing strong growth across its various divisions and geographies, the prospects for its dividend growth seem to be improving. For example, in the current year, it is expected to report a rise in net profit of 19%. This suggests that an increasing dividend could be ahead.
As well as income investing potential, AstraZeneca also offers defensive appeal. Its business model may be less reliant upon the performance of the wider economy than many of its FTSE 100 peers, thereby making it a less risky investment proposition. With there being numerous risks facing the world economy in 2020, it may deliver resilient investing appeal that makes it a worthwhile means of generating a passive income.
The income investing appeal of utility companies such as United Utilities (LSE: UU) has increased following the recent general election result. The threat of nationalisation has now receded, and this could encourage investors to reconsider their views on the wider industry.
Of course, water companies such as United Utilities face ongoing regulatory threats that could impact on their income investing potential. However, with the stock currently having a dividend yield of 4.5%, it seems to offer a margin of safety.
The stock’s track record of dividend growth suggests that it has the potential to offer inflation-beating dividend growth in the long run. For example, in the last four years it has delivered annual dividend growth of 2.3%. And with it being a defensive stock, it could offer relative stability during the Brexit period which may prove to be a useful ally for an investor who requires a dependable passive income from their portfolio.
With the company reporting strong customer service metrics and continued investment in its asset base in its most recent results, it could experience an improving level of return after what has been an uncertain period for the wider utility sector. As such, now could be the right time to buy it.
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Peter Stephens owns shares of AstraZeneca. The Motley Fool UK has recommended AstraZeneca. 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.