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Forget a Cash ISA. I’d buy these 2 FTSE 100 dividend stocks to retire early

Peter Stephens
A person holding onto a fan of twenty pound notes

While Cash ISAs may be a popular means of saving for retirement, they may not be the most effective strategy. After all, the income return on Cash ISAs is lower than inflation in many cases. With interest rates set to stay low over the coming months, this could lead to a loss of spending power that hurts your retirement prospects.

As such, now may be the right time to buy a diverse range of FTSE 100 shares. In many cases they offer wide margins of safety and healthy income returns. Here are two prime examples of such companies that I think could help you to retire early.


The recent quarterly update from Shell (LSE: RDSB) highlighted the company’s resilience when faced with challenging market conditions. Gas prices and chemicals margins were weak during the period, although the business was still able to deliver healthy levels of profitability and free cash flow.

Looking ahead, Shell may continue to experience uncertain operating conditions. However, it still has the potential to reduce debt levels and invest in its asset base to generate improving long-term financial performance.

With the stock currently trading on a price-to-earnings (P/E) ratio of 11.2, it appears as though investors have factored in the challenging trading conditions facing the business. Its bottom line is due to rise by 5% next year, which could lead to improving investor sentiment in the coming years.

Although there are more stable income shares in the FTSE 100, Shell’s dividend yield of 6.6% is appealing for long-term investors. As such, now could be the right time to buy a slice of the company while it trades on a modest valuation and when could offer improving total returns.


Another FTSE 100 share that could deliver an impressive return is Admiral (LSE: ADM). The motor insurance company’s most recent interim results showed that it is making progress in delivering its strategy. Notably, its European business is growing at a fast pace, while its loans business made a strong start. This could help to diversify its business and may provide access to growth opportunities.

With a 5.5% dividend yield, Admiral is an attractive income share. It has a solid track record of growing dividends, while modest profit growth forecasts over the next couple of years suggest there may be further scope for a rising shareholder payout.

Certainly, the wider motor insurance business has experienced a challenging period in recent months. Changes to the rate used to set personal injury compensation in the UK caused Admiral to experience a £33m headwind in the first half of the current year.

However, with the stock having a high yield and offering solid growth prospects, it could deliver an impressive total return which helps you to build a retirement nest egg.

The post Forget a Cash ISA. I’d buy these 2 FTSE 100 dividend stocks to retire early appeared first on The Motley Fool UK.

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Peter Stephens owns shares of Admiral Group and Royal Dutch Shell B. The Motley Fool UK has recommended Admiral 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 2020