If you have no savings at 50, then you need to take action right away. At Motley Fool, we believe the best way to build wealth for your retirement is to invest in a spread of FTSE 100 stocks for the long term.
Now is a good time to do it, as the market is still trading 20% lower than at the start of the year. This means you are picking up top FTSE 100 companies at reduced prices. If current volatility makes you wary, you could target defensive stocks like these two utility giants.
Both companies offer an attractive entry price, and you still get dividends as well. If you buy inside your Stocks and Shares ISA allowance, you can take all your growth and income free of tax.
I’d go for the SSE share price today
Power giant SSE (LSE: SSE) is a top FTSE 100 dividend stock, now more than ever. Although dozens of companies have dropped their payouts, it currently yields a thumping 7.86%.
That is a terrific rate of income, given that the Bank of England base rate is just 0.1%. Utilities are generally seen as attractive stocks to hold in a recession, as they offer basic services that people need whatever the economic weather.
Despite that, the SSE share price is trading around 25% lower than in February, when Covid-19 started to hit the FTSE 100. This offers an attractive entry point for investors looking to access a long-term income stream at a discounted price.
Dividends are not guaranteed, so there is a danger SSE could cut its payout in future. The group’s income has been hit by the pandemic and customer arrears will inevitably increase as the recession drags on. However, SSE still expects operating profits at its core businesses to grow this year, if at a slower pace. No promises, but it looks tempting for now.
Another FTSE 100 income hero
As the UK’s largest listed water company, United Utilities Group (LSE: UU) is fulfilling the most basic of human needs. Its share price has recovered slightly better from the March crash. It is now just 12% below its February peak.
United Utilities is also standing by its dividend, which currently gives you a yield of 4.68%. Before the pandemic, it pledged to increase its dividend by at least the rate of inflation. However, the group is now reviewing its policy for the 2020–25 regulatory period, to assess the impact of Covid-19, which could lead to delayed bill payments as customers struggle.
That surprised investors, who had assumed that its payout was one of the most reliable on the FTSE 100. However, it does have to repay around two thirds of its £1.2bn liquidity this year, while looking to raise a further £500–£800m. If it manages that, the dividend should be safe. I remain hopeful, but there are no guarantees in these strange times.
One option is to divide your money between the two, to spread your risk.
Harvey Jones has no position in any of the shares mentioned. 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.