Top FTSE 100 shares may have slashed dividends after the stock market crash but don’t despair, plenty are still paying out.
You can still generate the dividends you need to get rich and retire early, by building a portfolio of top FTSE 100 shares. As returns on cash, bonds and annuities collapse, shares still look the best way to generate a rising passive income for your retirement.
Investment platform Interactive Investor has just issued a list of the UK’s five top dividend stocks, and you won’t be surprised at the names. Especially when you see the list is headed by pharmaceutical giant GlaxoSmithKline. It has been a top income stock for years.
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Glaxo has frozen its dividend at 80p for years, as it diverts money into replenishing its drugs pipeline. That now looks a farsighted policy. This top FTSE 100 income share still yields 4.8%, thrashing cash.
Big pharma rival AstraZeneca also features in the top five. It generates a relatively low 2.6%, partly down to strong share price growth. Astra is expensive at more than 25 times earnings (against 14x for Glaxo), but this is a quality long-term buy-and-hold.
Tobacco giant Imperial Brands Group is the only one of these five FTSE 100 shares to cut its recent dividend, by a third. That was a painful move, the first in 24 years. As Interactive Investor points out, this will help Imperial Brands manage its £14bn debt and absorb the coronavirus hit. It is still forecast to yield 9.6%. Also, it trades at a bargain price 6.1 times forecast earnings.
Inevitably, oil giant BP features in the famous five FTSE 100 shares. It actually increased its first-quarter dividend payout, by 2.5%, handing £1.7bn to shareholders. This is doubly impressive as Royal Dutch Shell scrapped its long-standing dividend altogether.
I’d buy these 5 FTSE 100 shares for retirement
This may not last. BPs net debt now stands at $51bn. That’s due to acquisitions, capital investment and the oil price slump, but also years of share buybacks and dividend payments. New boss Bernard Looney’s move to announce £14bn of write-downs may pave the way for a second-quarter dividend cut. Given today’s high yield of 9.6%, investors may be willing to take the hit.
I’m pleased to see Phoenix Group Holdings feature in the FTSE 100 income share top five, as the insurance consolidator is a favourite of mine. It has a low-risk business model and recently justified my faith by hiking its dividend, by 1.74%. Right now, it yields a forecast 7.4% too.
That easily beats the 1% you are likely to get on cash or 2% to 3% on bonds, while avoiding the rigidity of annuities.
Dividends are never guaranteed, but over time should help you generate a rising passive income for a happier retirement.
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.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Imperial Brands. 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.