Investing in retirement is all about balance. On one hand, you want stocks that will help you grow your wealth over time and also provide income. On the other, you want to avoid taking big risks with your capital as your retirement lifestyle is at stake.
With that in mind, here’s a look at two FTSE 100 dividend stocks that I believe are well suited to those in retirement. In my view, both companies have the potential to deliver a nice mix of capital gains and dividends going forward, yet are not too risky.
A ‘sleep-well-at-night’ stock
If you’re looking for dividend stocks for retirement, it’s hard to look past consumer goods champion Unilever (LSE: ULVR) in my opinion.
For starters, the stock is relatively recession-proof. People buy Unilever products such as Dove soap and Persil detergent no matter whether the economy is flying or tanking. So, it’s a ‘sleep-well-at-night’ type stock.
Secondly, the group has significant exposure to emerging markets countries such as India and Brazil (emerging markets represent around 60% of sales), which means there’s an attractive long-term growth story. In a decade’s time, I expect sales to be far higher than they are today.
Thirdly, the company is a reliable dividend payer that has a very impressive dividend growth track record. And analysts expect the company to continue lifting its payout in the years ahead.
ULVR shares have experienced a significant pullback recently on the back of sterling strength and lower growth in the emerging markets. For long-term investors, I think this is an excellent buying opportunity. The prospective yield on offer is currently around 3.5%.
A play on the world’s ageing population
GlaxoSmithKline (GSK) is another FTSE 100 dividend stock that I believe is well suited to retirement portfolios. It’s a healthcare business that specialises in pharmaceuticals, vaccines, and consumer healthcare products such as painkillers and toothpaste.
What I like about GSK is that, like Unilever, it’s quite defensive in nature. During economic downturns, spending on healthcare tends to remain quite robust.
I also like the fact that the group is well positioned to benefit from the world’s ageing population. As people age, their demand for healthcare products such as painkillers tends to rise. Given that Glaxo owns a number of trusted brands in this space such as Voltaren, Panadol, and Fenbid (sold in China), I see an attractive long-term growth story.
Of course, you can’t discuss GSK without mentioning the big dividend on offer. Currently, GSK is paying out 80p per share in dividends per year, which equates to a yield of around 4.5% at the current share price. That’s certainly attractive in today’s low interest rate environment.
GSK shares have had a good run in recent months on the back of a strong third-quarter trading update in which the company upgraded its full-year earnings guidance. As a result, the stock isn’t as cheap as it was earlier in the year. I wouldn’t let the recent share price rise put you off buying though. I believe there’s still plenty of value left on the table.
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Edward Sheldon owns shares in Unilever and GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. 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