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Retirement savings: 2 FTSE 100 dividend stocks I’d buy in an ISA in 2020

Peter Stephens
Senior Couple Walking With Pet Bulldog In Countryside

With the FTSE 100 yielding 4.3% at the present time, there are a wide range of income opportunities through which to build a retirement savings portfolio.

Certainly, the index faces a number of risks that could cause challenges in the short run. However, in the long run, its risk/reward ratio may prove to be highly rewarding.

With that in mind, here are two FTSE 100 shares that appear to offer wide margins of safety alongside their high yields. They could deliver improving share price prospects after what have been uncertain periods for their industries.

Taylor Wimpey

Housebuilder Taylor Wimpey (LSE: TW) has reported resilient demand for its properties in the last few years. That’s despite consumer confidence in the UK being weak, and the macroeconomic outlook coming under pressure from political risks.

Government policies such as Help to Buy and stamp duty changes for first-time buyers could continue to support high demand for new homes over the coming years. Although the new government is apparently yet to set out its economic plan, a continuation of policies that are supportive to the housebuilding industry could lead to favourable operating conditions for Taylor Wimpey and its peers.

The business recently reported that it expects to maintain a net cash position in excess of £500m despite paying £600m in dividends in 2019. This shows that the company has a solid financial position through which to navigate potential challenges that may be ahead. Since it offers a dividend yield of 9.6% and trades on a price-to-earnings (P/E) ratio of 9.4, now could be the right time to buy a slice of the business for the long term.

Kingfisher

Also experiencing an uncertain period is FTSE 100 retailer Kingfisher (LSE: KGF). The DIY specialist’s recent results have shown that its operating conditions have been mixed across its various regions, which has contributed to weak sales and profit performance.

The introduction of a new senior management team is set to produce a revised strategy for the business. In its most recent update, the company highlighted operational issues, such as challenges in its supply chain, that have held back its performance. They are likely to be its main focus in the near term, which could mean that it takes time for Kingfisher to improve its market position to generate higher returns.

The stock currently trades on a P/E ratio of 11 and offers a dividend yield of 4.8%. While dividend growth and a return to a higher share price seem unlikely in the short run, the company has a strong position across a number of markets. Its margin of safety and the prospect of a revised strategy could lead to improved performance that boosts market sentiment and delivers a higher level of return for investors over the long run.

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Peter Stephens owns shares of Taylor Wimpey. The Motley Fool UK has no position in any of the shares mentioned. 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