As the year draws to a close, I’m drawing up a hit list of top FTSE 100 stocks to build my wealth in 2021 and beyond. This year has been tough for investors, but Covid-19 vaccines now promise a brighter future.
There are still plenty of bargain FTSE 100 stocks out there. I think these three should give me the dividend income and share price I’m after to achieve financial freedom and retire at a time of my choosing.
My first pick is FTSE 100 ‘big pharma’ stock GlaxoSmithKline (LSE: GSK). AstraZeneca has dominated the headlines lately, following its Oxford vaccine breakthrough, but Glaxo looks the superior dividend stock today, I feel.
Today, Glaxo yields 5.77%, and unlike many FTSE 100 stocks has maintained shareholder payouts throughout the pandemic. Chief executive Emma Walmsley may have held the dividend at 80p for five years, now, but I’m not complaining given that yield.
The Glaxo share price has fallen by around a fifth in recent months and I reckon this gives me a great buying opportunity. Today, it trades at just 11.1 times earnings. Believe me, that is cheap for Glaxo. Usually I would consider myself lucky to buy it at 15 times.
I’d buy these FTSE 100 stocks in 2021
My next FTSE 100 stock pick is more controversial. Oil giant BP (LSE: BP) is facing an existential threat from the rise of renewables, and the war on climate change. Chief executive Bernard Looney is desperately trying to repurpose BP for the net carbon zero world, and there is no guarantee he will win.
Yet I still believe BP can generate healthy income and growth from its legacy fossil fuel business, while switching to greener forms of energy. In the interim, BP offers a whopping forecast yield of 8.4%, despite halving its dividend in August.
The BP share price is climbing right now and could rebound further as the world starts travelling again. Brent crude is nudging $50 a barrel and the higher it climbs the better this FTSE 100 stock will perform.
I’ll be crying financial freedom
Asset manager and insurer Legal & General Group (LSE: LGEN) has maintained its income throughout the pandemic, holding its nerve even as rival Aviva slashed its payout. Today, it offers investors a juicy forward yield of 6.9%, covered 1.6 times by earnings.
The L&G share price has jumped almost 40% in the last month, which I’m glad to see, given that I have been tipping the stock for years. So it’s not as cheap as it was, but this FTSE 100 stock still looks nicely priced, trading at 8.63 times earnings.
Legal & General has shown its resilience through what should have been a tough year for asset managers. The combination of a low entry price, solid long-term prospects and generous dividend policy makes it a top retirement stock for my portfolio. I’d buy these three in 2021 and move a step closer to achieving financial freedom.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.