If you’re building a retirement portfolio, you need stocks that’ll perform well for decades. The businesses you invest in need to deliver reliable long-term growth. I’ve selected two FTSE 100 dividend stocks here which I think will deliver on this requirement.
Both shares are on my watchlist of stocks to buy. They’ve both been outstanding performers for many years and have hardly suffered any disruption from coronavirus.
FTSE 100 dividend stock #1: quality assured
Intertek Group (LSE: ITRK) provides quality assurance services to companies and other organisations all over the world. The firm’s activities cover a huge range of testing, certification and inspection services across many industries.
As you can imagine, this is a growing business. I can’t see this changing in my lifetime. In an increasingly technological and connected world, companies, governments and consumers need independent assurance that standards are being met consistently at all times.
The group’s half-year results were published last week, giving us a first look at how coronavirus has affected its operations. Although revenue for the first half of 2020 only fell by 8% to £1,331m, there was a larger hit to profits. Intertek’s adjusted pre-tax profit fell by a third to £151.5m.
However, the group’s cash generation remained very strong and, even at this difficult time, profit margins remained in double digits.
The company expects performance to be better during the second half of the year. Management also believes the pandemic has created new opportunities for medium-term growth.
Why I’d buy
Intertek’s idea of a bad year would be a good result for many businesses. The group is consistently profitable and has expanded over the years through small, specialist acquisitions. I believe this is a low-risk approach that should continue to work well.
The shares currently trade on 28 times 2021 forecast earnings, with a dividend yield of 1.9%. Although this is quite pricey, I think Intertek’s profitability and sustainable growth means the stock will probably continue to beat the market over the long term.
If you’re still building your retirement portfolio, I see this FTSE 100 dividend stock as a great buy.
FTSE 100 dividend stock #2: essential repeat purchases
Another company that’s performed well through the pandemic is distribution group Bunzl (LSE: BNZL). This global company provides a huge range of consumable products to businesses and public sector customers.
Products sold include food packaging, cleaning products, personal protective equipment and many other such items. The key theme is that it’s all essential and consumable — so customers all make regular repeat purchases.
As you might guess, Bunzl has benefited from a surge in demand for cleaning and hygiene-related products this year. In June, the company said it expects sales to have risen by about 6% during the first half of the year. Based on last year’s half-year sales of £4.5bn, that’s more than £270m of extra sales.
Like Intertek, Bunzl enjoys strong profitability and good cash generation. Debt levels look comfortable to me and the company has a long, consistent record of growth.
As I write, Bunzl shares trade on about 18 times 2021 forecast earnings, with a dividend yield of 2.2%. This is a stock I’d buy today and happily hold forever. I don’t think it will disappoint.
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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Intertek. 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.