With interest rates on cash savings accounts currently being lower than inflation in many cases, buying FTSE 100 dividend shares could be a shrewd move.
The index offers a relatively high yield at the present time, with many of its members set to produce rising dividends over the coming years.
With that in mind, here are two large-cap income shares that could offer a growing passive income and may be worth buying today.
The most recent results from real estate investment trust (REIT) British Land (LSE: BLND) highlighted the progress it is making in responding to changing occupier demand in the commercial property sector.
For example, the company detailed its further shift away from retail space, as e-commerce continues to contribute to weaker demand for retail units across the UK. In its place, British Land is seeking to increase its exposure to office units. It has enjoyed relatively robust demand for new and existing units, which could help to offset a challenging outlook for the retail segment.
The stock has a long track record of delivering dividend growth alongside a solid yield. At the present time, it offers an income return of around 5.7%. It is expected to increase shareholder payouts by 2.4% per annum over the next two years, which is likely to be ahead of inflation. And since its shares trade on a price-to-book (P/B) ratio of 0.7, it seems to offer a wide margin of safety.
Therefore, while commercial property may not be a popular sector to invest in at the present time, it could offer a mix of high income returns and share price growth potential through companies such as British Land.
Another FTSE 100 share that has experienced mixed performance in recent quarters is insurance business Aviva (LSE: AV). The company’s half-year results showed that its general insurance division made encouraging progress, but this was offset to some extent by weak performances in life insurance and asset management.
As a result, the company has made major changes to its operating model. For example, it has separated its life and general insurance businesses, while ramping-up its investment in digital opportunities. This could strengthen its competitive position in those markets and enable it to report a stronger financial performance in the coming quarters.
With a dividend yield of 7.9%, Aviva could offer a highly attractive income return. It increased dividends per share by 3% at its half-year results, and is forecast to raise them by 3.9% in the next financial year. This could mean that investors can obtain an 8%+ yield over the medium term, with the potential for above-inflation rises in shareholder payouts.
Alongside its income potential, Aviva trades on a price-to-earnings (P/E) ratio of just 7. This suggests that it offers a wide margin of safety and may be worth buying today for the long term.
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Peter Stephens owns shares of Aviva and British Land Co. The Motley Fool UK has recommended British Land Co. 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.