Having no retirement savings at 40 can cause many people to be concerned. It can be difficult to save due to expenses such as a mortgage, credit card repayments, and child-related costs. But even setting aside as little as £100 a month can start the ball rolling and enable you to grow your savings at a good rate.
You want your money to work hard for you, so I would recommend setting up a Stock and Shares ISA. In this kind of account, any proceeds from your investments are not taxed. This allows you to keep more of your investment income so that it can be reinvested again when you spot a good opportunity.
Within the ISA, I would go further and look to buy into high-dividend-yield stocks to enable you to start generating income within the first year of you holding it (some firms even pay out dividends on a semi-annual or even quarterly basis). I like these two examples at the moment:
Kingfisher (LSE: KGF) has had a tough time over the past year, seeing the share price fall last October below 200p to levels we hadn’t seen since 2009. Some City analysts think there is further room to fall, with a major bank forecasting the price to fall as low as 175p.
I’m always hesitant of trying to catch shares exactly at the bottom, as it is impossible to time and you risk missing the opportunity at the moment. In my opinion, it is a good buy, with a dividend yield of around 5.3%. This has been helped by the lower share price.
Critics argue that Kingfisher is in essence a high street retailer, and that retail faces a tough future due to the rise in online shopping. Yet when you look at some of the brands under the Kingfisher umbrella (B&Q and Screwfix), I do not think that reasoning particularly applies. These brands have low elasticity of demand, meaning that people will still buy things like a hammer and some paint, even if the price goes up 5% or so.
When you add this into the equation, I think the share looks cheap, even with the price-to-earnings ratio creeping higher.
I’ve long been a fan of ITV (LSE: ITV), largely because the business is quietly keeping up with the times. I’ll admit this isn’t immediately evident when you look at the results – last year it had a 6% fall in viewing hours. Yet Dame Carolyn McCall is making a push towards big ticket events and streaming services to reverse this trend.
The Rugby World Cup was a huge coup, and having the co-rights to the FA Cup until next year is big too. On the streaming side, have a look at Britbox, a Netflix-style service partly powered by ITV that recently came online.
With this in mind, the share price has rallied from the third quarter of 2019 onward, but I still think there is plenty of upside left for you to lock in a 5.81% dividend yield and benefit from some capital appreciation.
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Jonathan Smith does not own shares in any company mentioned.The Motley Fool UK has recommended ITV. 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.