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I’d buy these 3 FTSE 100 stocks to beat the State Pension in 2020

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You’re not going to live a life of luxury on a State Pension of £168.80 per week, that’s for sure. I reckon the best way to make provision for your retirement is to invest in UK shares while you’re still working.

For that, I’d look for reliable companies with strong cash generation and good dividends. And if you can get the shares at a good price, that’s even better. Here are three I think fit the bill.

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Insurance dividends

I’ve long been a fan of insurance companies, and my favourite right now is Aviva (LSE: AV). The market has been bearish towards Aviva throughout the recent years of Brexit confusion, and the shares are down as a result. Over the past five years, Aviva stock has lost 25% of its value, and as a shareholder I don’t much like that.

But all that time, Aviva has been paying good progressive dividends. The anticipated 2019 dividend looks set to yield 7.7%, and 2020’s should be even better. In its latest update, AJ Bell has put Aviva’s forecast 2020 yield as high as 8.2%. Cover by earnings would come in at 1.84 times, and that looks safe enough to me.

The company is going through a transition phase right now, and that creates uncertainty. But I think it’s also given us a great buying opportunity. I already own some shares in my pension portfolio, but I might go for an Aviva top up.

Tobacco weakness

British American Tobacco (LSE: BATS) shares have made a solid start to 2020, up 6% in just less than three weeks. But the bigger picture shows a drop of nearly 40% since a peak in May 2017.

The whole tobacco business has been up in the air for the past few years. Uncertainty over the future of new smoking technology hasn’t helped. And changing regulations, particularly in the US, have hit the industry too.

But British American has kept its earnings growing, albeit at a slower pace than in the past. After a 5% hike in EPS in 2018, analysts are expecting 2019 to have generated another 8%. And there are similar gains on the cards for the next two years, dropping the 2021 P/E to under ten.

The falling share price has boosted the dividend yield too, and analysts are predicting around 6.5% in 2020.

That makes British American Tobacco look to me like one to buy and hold for retirement income.

Solid housing

I’ve been keen on housebuilders for some time, and I’ve just examined Taylor Wimpey. But I like all the builders in the FTSE 100, and here I’m looking at Barratt Developments (LSE: BDEV).

Fears that Brexit was going to cause a property crash seem to have been assuaged now. As a result, Barratt shares have had a few good months, leading to a 12-month gain of 52%. But even after that, we’re still looking at P/E multiples of only around ten.

To me that’s cheap for a company with good long-term growth prospects, but Barratt offers solid dividends too. With surplus capital to return to shareholders, the total forecast yield stands at 6%. That’s below the bigger yields offered by Wimpey, but Barratt’s dividends are progressive.

They’re well covered too, with the 47p total expected for 2020 covered 1.5 times by forecast earnings. Interim results are due on 5 February, and I’m expecting to see further impressive progress.

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Alan Oscroft owns shares of Aviva. 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.

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