Building a retirement portfolio? I think these FTSE 100 stocks could pay you for life

Edward Sheldon highlights two reliable FTSE 100 (INDEXFTSE: UKX) dividend payers he believes could be well-suited to retirement portfolios.

Edward Sheldon, CFA

Based in London, Edward is a freelance investment writer/analyst who has clients all over the world. Prior to launching his own investment writing business in 2017, he spent 15 years working in private wealth management and institutional asset management, both in the UK and in Australia. Edward is a passionate investor himself and manages his own global equity portfolio. This contains a mix of large-cap growth stocks, large-cap dividend stocks, and small-cap growth stocks. His stock-picking strategy combines ‘growth’, ‘quality’, and ‘thematic’ approaches. Edward holds a Commerce degree from the University of Melbourne, as well as the Investment Management Certificate (IMC) and the Chartered Financial Analyst (CFA) qualification. You can find him on Twitter @EdwardSheldon7

Published 26 August, 2019 3:21 pm BST

| More on: RKT

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Building a retirement portfolio requires careful thought. You want stocks that can provide you with a steady stream of income in retirement while also potentially generating some capital growth. However, you don’t want to be taking large risks with your money as capital preservation is important at this stage of your life.

With that in mind, I want to highlight two FTSE 100 dividend stocks I believe have the potential to deliver reliable dividends for the foreseeable future, as well as long-term capital growth. I think both stocks could be good additions to a diversified retirement portfolio.

Global hotel group

InterContinental Hotels Group (LSE: IHG) owns an impressive portfolio of brands including InterContinental, Crowne Plaza, and Holiday Inn. The group has a global presence, with more than 5,700 hotels in its portfolio.

I think IHG could be a great retirement portfolio pick for a number of reasons. For starters, the company looks well-placed to benefit from the retirement of the Baby Boomers (who in general love to travel) and rising wealth across Asia. In my view, both of these powerful demographic trends should provide a boost to hotel companies in the years ahead.

Secondly, there’s the company’s dividend track record. With a yield of 2% (forecast for FY2019), IHG doesn’t haven’t the highest yield in the FTSE 100. However, it’s a reliable dividend payer and has increased its payout every single year over the last decade. Given the company’s healthy level of dividend coverage, I see no reason why IHG can’t continue to reward shareholders with dividends (and dividend growth) going forward.

Trading on a P/E ratio of 20.5, I think IHG shares are reasonably priced, given the company’s attractive attributes. That said, any near-term share price weakness caused by trade war uncertainty could potentially provide a more attractive entry point.

Trusted by millions

Another FTSE 100 company I believe could be well suited to a retirement portfolio is consumer goods champion Reckitt Benckiser (LSE: RB). It owns a world-class portfolio of health and hygiene brands, which includes names such as Nurofen, Dettol, and Gaviscon.

From a retirement portfolio perspective, Reckitt ticks a lot of boxes, in my opinion. Firstly, due to the nature of its products – which are trusted by millions of people across the world – the company is able to generate consistent revenues and profits, which makes it a ‘sleep-well-at-night’ type stock.

Secondly, like IHG, the company looks well-placed to benefit from both the world’s ageing population and rising wealth across Asia, as both trends should increase the demand for healthcare products.

Thirdly, the company is a reliable dividend payer and has a great track record of lifting its payout. The yield is currently 2.9% (forecast for FY2019) and dividend coverage is strong at two times, which suggests the payout is sustainable.

Reckitt Benckiser shares currently trade on a forward-looking P/E of 17.8, which I think is a fair valuation given the company’s track record of generating shareholder wealth. Overall, I see it as a top pick for retirement portfolios.