With the State Pension amounting to just £8,767 per year, many retirees are likely to need a second income in older age.
Since the FTSE 100 appears to offer good value for money at the present time, with it having a dividend yield of around 4.5%, there are a number of opportunities to generate a growing passive income across the large-cap share universe.
With that in mind, here are two FTSE 100 stocks that could offer an improving income outlook, as well as relatively stable financial performance over the long term.
It’s been a difficult journey for pharmaceutical company AstraZeneca (LSE: AZN) over the last decade. It has seen its profitability fall heavily due to the loss of patents on key drugs, with this leading to a lack of dividend growth in recent years.
Now though, the company appears to be in a relatively strong position. It has invested heavily in its pipeline under a strategy that has sought to focus on core growth areas. This strategy is now expected to bear fruit, with the business forecast to post a rise in net profit of around 12% in the current year.
This could stimulate AstraZeneca’s dividend growth prospects, and lead to an improving income outlook for its investors. It now has a dividend yield of just 3.4%, but its potential to increase dividends at a pace that exceeds inflation could lead to a robust outlook from an income perspective.
Alongside this, the company’s defensive appeal could help it to outperform the wider FTSE 100 at a time when the prospects for the global economy remain highly uncertain.
Unilever’s (LSE: ULVR) recent updates have shown that its current growth strategy is paying off. It has focused investment on fast-growing markets across the emerging world, with them now making up the lion’s share of its revenue. They are also the main catalyst behind the company’s growth rate, and are likely to remain so over the medium term as wages in countries such as China move higher at a rapid rate.
Like AstraZeneca, Unilever’s dividend yield is below that of the wider FTSE 100 at the present time. The consumer goods company is set to record an income return of just 2.9% in the current year. However, with its bottom line forecast to produce a gain of 10% this year and its dividend payments being covered 1.6 times by profit, the scope for a rapidly-rising dividend seems to be high.
Although Unilever may lack the defensive appeal of some of its FTSE 100 peers, its potential to enjoy above-average growth over the long run seems to be high. It has a wide range of popular brands in a number of different markets. This provides it with a wide economic moat which, alongside its growth potential, makes it an enticing income opportunity for the long term.
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Peter Stephens owns shares of AstraZeneca and Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended AstraZeneca. 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