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Building a retirement portfolio? I think these FTSE 100 stocks could pay you for life

Edward Sheldon, CFA
Happy retired couple on a yacht

Building a retirement portfolio requires careful thought. You want stocks that can provide you with a steady stream of income in retirement while also potentially generating some capital growth. However, you don’t want to be taking large risks with your money as capital preservation is important at this stage of your life.

With that in mind, I want to highlight two FTSE 100 dividend stocks I believe have the potential to deliver reliable dividends for the foreseeable future, as well as long-term capital growth. I think both stocks could be good additions to a diversified retirement portfolio.

Global hotel group

InterContinental Hotels Group (LSE: IHG) owns an impressive portfolio of brands including InterContinental, Crowne Plaza, and Holiday Inn. The group has a global presence, with more than 5,700 hotels in its portfolio.

I think IHG could be a great retirement portfolio pick for a number of reasons. For starters, the company looks well-placed to benefit from the retirement of the Baby Boomers (who in general love to travel) and rising wealth across Asia. In my view, both of these powerful demographic trends should provide a boost to hotel companies in the years ahead.

Secondly, there’s the company’s dividend track record. With a yield of 2% (forecast for FY2019), IHG doesn’t haven’t the highest yield in the FTSE 100. However, it’s a reliable dividend payer and has increased its payout every single year over the last decade. Given the company’s healthy level of dividend coverage, I see no reason why IHG can’t continue to reward shareholders with dividends (and dividend growth) going forward.

Trading on a P/E ratio of 20.5, I think IHG shares are reasonably priced, given the company’s attractive attributes. That said, any near-term share price weakness caused by trade war uncertainty could potentially provide a more attractive entry point.

Trusted by millions 

Another FTSE 100 company I believe could be well suited to a retirement portfolio is consumer goods champion Reckitt Benckiser (LSE: RB). It owns a world-class portfolio of health and hygiene brands, which includes names such as Nurofen, Dettol, and Gaviscon.

From a retirement portfolio perspective, Reckitt ticks a lot of boxes, in my opinion. Firstly, due to the nature of its products – which are trusted by millions of people across the world – the company is able to generate consistent revenues and profits, which makes it a ‘sleep-well-at-night’ type stock.

Secondly, like IHG, the company looks well-placed to benefit from both the world’s ageing population and rising wealth across Asia, as both trends should increase the demand for healthcare products.

Thirdly, the company is a reliable dividend payer and has a great track record of lifting its payout. The yield is currently 2.9% (forecast for FY2019) and dividend coverage is strong at two times, which suggests the payout is sustainable.

Reckitt Benckiser shares currently trade on a forward-looking P/E of 17.8, which I think is a fair valuation given the company’s track record of generating shareholder wealth. Overall, I see it as a top pick for retirement portfolios.

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Edward Sheldon owns shares in Reckitt Benckiser. The Motley Fool UK has recommended InterContinental Hotels Group. 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.

Motley Fool UK 2019