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I’d buy these 3 FTSE 100 dividend stocks to generate a rising passive income and retire early

Harvey Jones
·3-min read
Piggy bank next to a financial report
Piggy bank next to a financial report

Investors can still find plenty of FTSE 100 dividend stocks paying generous levels of income, despite the Covid-19 crash. You can reinvest those payouts while still working, then use them to top up your pension when you retire.

Dividend stocks should generate a rising income over time, as most companies endeavour to increase their payments year after year. Better still, it’s a passive income, which means you don’t have to do anything to earn it. FTSE 100 dividend stocks like these three could even help you retire early.

Pharmaceutical giant GlaxoSmithKline (LSE: GSK) has been a FTSE 100 dividend hero for years, and remains a top income stock today. While investors have been disappointed by management’s decision to freeze the payout at 80p a share for the last few years, it’s always seemed a sensible move to me. It allows the company to pump more money into its drugs pipeline, to build future revenues.

I’d buy this FTSE 100 dividend stock today

Investors can hardly complain, given the stock currently yields 5.47%. That’s a terrific income, especially with the base interest rate at 0.01%. It’ll look even better if we get negative rates. Cover is reasonable, at 1.5 times earnings.

Better still, the Glaxo share price is relatively cheap right now, trading at 11.62 times earnings. It has been drifting downwards lately, and trades around 12% lower than six months ago. This looks like one of the most compelling FTSE 100 dividend stocks today.

Most FTSE 100 dividend income investors will already have Glaxo on their radar, but some may have overlooked another top stock, fund manager Schroders (LSE: SDR). It currently yields 4.05%, and cover is better here at 1.7 times earnings.

Asset managers are often seen as a geared play on the stock market and, inevitably, the Schroders share price fell in the March crash. It has recovered strongly though and, in contrast to Glaxo, is up 12% in the last six months.

With global central bankers effectively backstopping share prices, the risk is greatly reduced. You can still buy it at a discounted valuation of 13.95 times earnings. Schroders has a great long-term pedigree, and looks like another tempting FTSE 100 dividend stock for those seeking rising passive income.

This rising passive income could be yours

Plumbing and heating products distributor Ferguson (LSE: FERG) is a play on the US economy, as it generates more than 90% of its revenues from the States. However, investors should not overlook its income capabilities as well.

Ferguson suspended its dividend earlier this year but has now restored its payout after trading picked up. Revenues fell by just 0.9% to $21.8bn in the year to 31 July, with pre-tax profit down 4.8% to $1.3bn. These figures look assuring given today’s uncertainties.

This FTSE 100 dividend stock may only yield 2.6%, but the payout is handsomely covered 2.7 times, giving scope for progression. The Ferguson share price is more expensive, at 20.2 times earnings. Maybe start with Glaxo and Schroders, and keep Ferguson on your watch list.

The post I’d buy these 3 FTSE 100 dividend stocks to generate a rising passive income and retire early appeared first on The Motley Fool UK.

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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.

Motley Fool UK 2020