I believe that buying FTSE 100 shares that pay reliable dividends can be an excellent strategy for generating retirement income.
Keeping your money in cash or a savings account may not always be the best way to secure a wealthy retirement. The interest earned in a savings account often doesn’t even cover inflation.
On the other hand, Britons know we’ve an important investment structure that comes with legal tax advantages — ISAs. So if you’re looking to invest your hard-earned cash in June, I’d consider learning more about the different types of ISA available to you, with an emphasis on Stocks and Shares ISAs.
Currently, there’s a maximum subscription allowance of £20,000 per adult per tax year. As our tax year runs from 6 April to 5 April, so the deadline for individuals to contribute to the previous year’s ISA is April 5 2021. Yet I’d urge readers to not wait until April next year to start.
No two scenarios are the same when it comes to planning for retirement. However, the recent market decline provides ample opportunities for creating a portfolio that may suit your needs and fit a long-term investment horizon. And stocks with robust dividends would add nicely to your retirement income stream.
So, with that said, here’s my top FTSE 100 dividend share pick to buy in June to provide you with extra income in retirement.
Investing in BHP
Headquartered in Melbourne, Australia, BHP (LSE: BHP) is one of my first choices for dividend investing. It has diversified operations across several divisions including iron ore, copper, aluminium, and petroleum. It purchases and operates long-life, large commodity-producing resource assets such as coal mines or iron quarries.
Analysts consider its portfolio of assets to be among the highest quality in the world. They emphasise that copper, in particular, has especially good fundamentals that look set to continue for many years to come. And the diversified portfolio is underpinned by a strong balance sheet.
In its April quarterly report, the group underlined that it expects to continue generating solid cash flow for the rest of the year. Given the current uncertainty regarding various coronavirus-related disruptions many companies face, investors were also pleased to learn that its full-year unit cost guidance remains unchanged for the 2020 financial year. Its supply chains remain open too.
BHP’s quarterly update showed that demand in China, an important market, has also been strengthening in recent weeks. And Australia’s economic conditions are starting to look more favourable than some weeks ago. However, demand for its products has slowed somewhat in several other markets, such as the US. On 21 July, management is expected to provide an operational review for the year ended 30 June.
Year-to-date, BHP stock is down about 11%. But the month of May was rather strong for the group and the stock was up close to 19%. Investors are hopeful that the global easing of various lockdown measures may benefit the stock.
The current share price of 1,581p supports a dividend yield of 7.35%. Shares of this FTSE 100 stalwart are expected to go ex-dividend in September. Given the current P/E of 10.5 and the strength of assets, I’d consider buying the dips.
For other long-term buys right now, I'd also check out the following.
With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…
As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.
With so many blue-chip and mid-cap companies scrambling to hoard cash right now, where are we income investors to turn for decent yields?
Fortunately, The Motley Fool is here to help…
Our analyst has unearthed what he believes could be a very attractive option for income- seeking investors – a company that, in his view, boasts a ‘reliably defensive’ business model, combined with a current forecast dividend yield of 4.2% to boot!*
But here’s the really exciting part…
This business even has form in riding out this kind of situation, too… having previously increased sales and profits back in 2008 and 2009 when the world was gripped in the deepest economic crisis since the Great Depression.
*Please be aware that dividends are variable and not guaranteed.
tezcang 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.