Aged 60 and no savings? Don’t relish living on the basic State Pension of £8,767 a year? Don’t despair! It’s not too late to build a nest egg that could increase your income in retirement.
The FTSE 100, for example, has a long record of growing even modest sums at a relatively high rate, and providing a rising income from dividends.
Right now, many blue-chip companies have generous dividend yields. As such, this could be a good time to invest in such stocks to boost your retirement income. Here are two I’d be happy to buy today.
Carnival (LSE: CCL) is the world’s largest cruise ship operator. It owns well-known brands, including Holland America, P&O Cruises and Cunard. It’s the dominant player in a growing industry. This means it could increase its profits over time, and provide investors with a rising income.
It isn’t all plain sailing for Carnival at the moment. Last year, it suffered a high number of unusual weather-related and other events. It also saw a downturn in demand in some of its large source markets in Europe. Nonetheless, it posted record revenue and earnings, the latter increasing 3.3%.
The company and City analysts expect no real pick-up in earnings growth in 2020. This is due to the tail effect of last year’s events and likely continuing weakness in European markets.
However, Carnival’s actions for stimulating demand and increasing cost efficiencies bode well for higher growth rates in future. The company believes it’s well positioned to return to double-digit earnings growth.
Double your income
At a share price of 3,257p, Carnival trades on a forward price-to-earnings (P/E) ratio of 9.4. Buyers can also look forward to a forecast first-year dividend yield of 4.8%. In my opinion, the P/E is extremely cheap and the starting yield highly attractive.
The income in the first year would almost double after seven years. This is if the dividend increased at 10% a year in line with management’s longer-term outlook for earnings growth. I think Carnival has a lot of appeal for anyone aged 60 looking to invest for a growing income in retirement.
At a current share price of 4,429p, consumer goods giant Unilever (LSE: ULVR) has a higher P/E (19.1) and lower yield (3.5%) than Carnival. However, I believe the reliability of its earnings makes its current P/E and yield attractive.
Some consumers may delay making a ‘big ticket’ purchase like a cruise during an economic downturn. They’re less likely to stop buying Unilever’s much-loved and trusted brands. These include the world’s leading health soap, Lifebuoy, and foods like Marmite and Hellmann’s.
Rising income stream
Last month, Unilever said it’s seen challenging conditions in some of its global markets. It expects this to put a dent in revenue growth for 2019 and the first half of 2020. However, it’s a measure of the group’s resilience that it doesn’t expect any impact on earnings.
City number crunchers reckon the company can produce consistent high-single-digit earnings and dividend growth in the coming years. This is another stock I’d buy for a rising income stream in retirement.
Income-seeking investors like you won’t want to miss out on this timely opportunity…
Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this out-of-favour business that’s throwing off gobs of cash!
But here’s the really exciting part…
Our analyst is predicting there’s potential for this company’s market value to soar by at least 50% over the next few years...
He even anticipates that the dividend could grow nicely too — as this much-loved household brand continues to rapidly expand its online business — and reinvent itself for the digital age.
With shares still changing hands at what he believes is an undemanding valuation, now could be the ideal time for patient, income-seeking investors to start building a long-term holding.
Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Income Share… free of charge!
G A Chester has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Carnival. 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.