With interest rates having the potential to move lower in the coming months, the outlook for Cash ISAs could be highly challenging. After many years of disappointing returns, their interest rates could decline. This could mean now is a good time to consider FTSE 100 dividend shares to generate a higher income return.
With that in mind, here are two FTSE 100 stocks that currently offer high yields. They could also deliver impressive levels of capital growth in the long run.
The past year has been eventful for utility company SSE (LSE: SSE). It has faced significant political risk that posed a threat to its prospects, while the sale of its energy services division has been a long and difficult process.
Now, though, the company could face an improving outlook. Its low-carbon strategy could lead to a stronger financial performance, with its recent half-year results suggesting the company has a solid pipeline of opportunities within the renewables space.
Since the stock currently has a dividend yield of around 5.4%, it continues to offer an income return which is in the top quartile of the FTSE 100. This could make it an appealing stock for investors who are seeking to obtain a passive income that has the potential to grow at a similar pace to inflation over the coming years.
SSE’s share price has risen significantly following the general election result. It now trades on a forward price-to-earnings (P/E) ratio of 14.9. Although this is substantially higher than it was just a few months ago, the stock’s financial prospects have improved and it could deliver a generous total return as it implements its carbon-neutral strategy.
St. James’s Place
Another FTSE 100 share that could offer a generous and growing passive income is wealth manager St. James’s Place (LSE: STJ). Its third quarter update showed it has enjoyed continued growth in assets under management, with net inflows being 7.7% and the company having an asset retention rate of 96%.
Although the uncertainty of financial markets in the past six months may have caused investors in the stock to become increasingly cautious about its prospects, its track record of growth highlights that the prospects for the business could be relatively bright. And with political risk in the UK having subsided to some degree following the election, confidence among investors could build through 2020.
With St. James’s Place currently having a dividend yield of 4.6%, it could offer a sound income investing outlook compared to the wider index. Certainly, it may offer less near-term stability than some defensive shares in the FTSE 100. But its capacity to generate rising profitability over the long run may mean that it can afford to pay an increasing dividend that produces an improving financial future for income-seeking investors.
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Peter Stephens owns shares of SSE. 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.