There’s a lot of uncertainty in the world right now, but I still need to plan for retirement. I think these FTSE 100 stocks might be my best path towards comfort later in life.
My retirement plan is two-pronged: first, I want to invest in a high-growth stock that I can buy now and watch the gains tick over. And I also want a safe dividend-payer that can provide passive income and security.
JD Sports Fashion
My “wildcard” bet is a bit riskier than the average retirement stock. Retail is undergoing a significant shift to e-commerce and competition is fierce. However, JD Sports’ share price has soared more than 75% in the past year, from 512p to 907p.
This kind of growth intrigues me, so I began digging into this FTSE 100 company’s financials. 2020 revenue rose just under 1% to £6.16bn, despite temporary store closures. Even with increased Covid-19 costs, it managed to score a pre-tax profit of £421.3m — down just 5% year-on-year. What excites me for the future is that 55% of the company’s total sales worldwide came from the US and mainland Europe in 2020. This shows a strong international presence that can be built upon. I think JD can become one of the top sports retailers on the planet, and has plenty of growth in it yet.
I still have some concerns though. While the risks of it are waning, I’m worried about the impact of a prolonged pandemic. Or worse, another pandemic in the future — I’m not planning on retiring any time soon, after all. An increase in direct-to-consumer sales from major brands could also hurt JD. With retail e-commerce accelerating rapidly, consumers may simply go straight to Nike or Adidas rather than shop at JD. Hopefully, there will be enough market share to go around though and JD did do every well in e-commerce in its latest year.
Despite being one of the FTSE 100’s worst-performing shares over a year, GlaxoSmithKline is on my retirement watch list too. At its current price of 1,350p, this pharmaceutical giant is down more than 10% in the past 12 months. The FTSE 100 member is a dividend-paying stock, with a yield of 5.7%, which means passive income in my later years.
While GSK missed out on last year’s pharma rally, this was a one-off in my opinion. its dip was partly due to its regular vaccines business suffering during lockdown as people stayed away from doctors’ surgeries. The group’s turnaround is making progress. Sales of new pharmaceuticals rose by 12% to £2.5bn in Q3, accounting for 30% of all revenue. Glaxo also remained very profitable, with an operating margin of 22%. As the sixth-largest pharma company in the world, I believe GSK can remain at the top and provide my retirement with a passive income stream.
GSK is far from risk-free though, with many changes on the horizon. It plans to split in two in 2022 (the two ‘new’ businesses will focus on BioPharma and Consumer Healthcare), which may dent earnings. Its dividend is also set to fall for the first time in 15 years, which could hurt my retirement plans. This corporate restructuring could have mixed results and may lead to worse returns.
Jamie Adams 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.