Who doesn’t want to retire wealthy? Spending your later years free of financial worries, and making the most of all that free time, is a universal dream.
I think the best way to achieve it is to invest in a portfolio of stocks and shares, using your tax-free Stocks and Shares ISA. I’d suggest looking at these two top FTSE 100 dividend and growth stocks.
The AstraZeneca (LSE: AZN) share price has been flying lately, up 25% over the last year, and 75% over five years. This is a tribute to CEO Pascal Soriot, who has worked hard to turn the company around since joining in 2012. Investors were concerned that the pharmaceutical giant’s pipeline of new drugs was running dry, at the same time as several blockbuster treatments came off patent, allowing generic competitors to pile in to its patch.
Soriot responded by pouring money into R&D and it is starting to pay off, as the group gets regulatory approval for a number of new medicines.
AstraZeneca has raised its sales guidance twice in the last year, with full-year product sales up 12% to a hefty $23.6bn, while sales of new medicines rose 59% to $9.9bn. While the coronavirus could hit Chinese earnings, recent strong performance gives it a cushion.
Another concern is that the US Presidential election could whip up public anger over drugs pricing. However, in the longer run, our ageing society will need all the pharmaceuticals it can get, and AstraZeneca is in a good place right now. The stock currently yields just 2.8%, but that partly reflects strong recent share price growth, and you can expect dividends to rise steadily over time. AstraZeneca stock isn’t cheap, trading at 24.2 times forward earnings, but that’s because it is a quality stock.
The BAE Systems (LSE: BA) share price has climbed an impressive 43% over the past 12 months, re-establishing its reputation as one of the top FTSE 100 stocks around.
Its recent full-year results also impressed, with sales up 7% to £20.1bn, and operating business cash flow up more than 30% to £1.3bn. Crucially for income investors, dividends totalled 23.2p per share for the year, up 4.5% compared to last year. This kind of growth is vital, because it means payouts are growing faster than inflation, which gives you a rising passive income from your portfolio.
One concern is its large pension deficit, but it is taking advantage of low interest rates to fund £1bn of accelerated pension deficit funding.
Despite the surge in BAE Systems stock, the shares still only trade at 13.8 times earnings, which makes now look like an attractive entry point to me. The forecast yield of 3.6% is covered twice by earnings, and as we have seen, looks set to rise much faster than inflation.
Top FTSE 100 dividend growth stocks like these two are exactly what you need to generate the rising passive income that can help you get the most out of life during your retirement.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. 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.