Over 50? I think these FTSE 100 dividend stocks could be great additions to your retirement portfolio

These two FTSE 100 (INDEXFTSE: UK) stocks could be well suited to those who are aged 50 and over and looking for both growth and stability, says Edward Sheldon.

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 8 November, 2019 9:36 am GMT

| More on: BA.DGE

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.

Investing for retirement in your 50s is all about balance. On one hand, you want stocks that will rise over time and boost your retirement savings. On the other hand, you don’t want to be taking on too much risk. With your retirement at stake, now is not the time to be loading up on penny stocks.

With that in mind, if you’re over 50 and looking to build up your retirement pot, have a look at the two FTSE 100 dividend stocks below. I believe that both are well suited to investors in their 50s who are looking for long-term growth.

Diageo

Alcoholic beverage manufacturer Diageo (LSE: DGE) – which owns a world-class portfolio of well-known brands including Johnnie Walker, Smirnoff, and Tanqueray – is pretty much the perfect buy-and-hold retirement stock, in my view.

For starters, it’s a ‘sleep-well-at-night’ stock. Consumers tend to drink alcohol during both the good times and the bad, which means that the company is relatively recession-proof. With Diageo, you don’t need to worry about a global recession (people often drink more during a recession).

Secondly, there’s an attractive long-term growth story. Diageo generates a substantial proportion of its sales from emerging markets and as wealth across these countries rises over the next few decades, more people (just the 750m or so) will be able to afford its products. This should lead to higher sales and profits.

Thirdly, the company is a highly reliable dividend payer. Not only has it paid a dividend every year since 1998, but it has also notched up 21 consecutive dividend increases now, which puts it in an elite group of dividend stocks. Currently, the yield on offer is around 2.3%.

Diageo rarely trades cheaply because it’s the stock that everyone wants to own. However, right now, it’s trading nearly 15% below its 52-week high on a P/E of 22.2. At that valuation, I think it’s a ‘buy’.

BAE Systems

Another FTSE 100 dividend stock that I believe is well suited to those who are 50 or older is BAE Systems (LSE: BA) – a multinational defence and security business that helps to protect national security and keep critical information and infrastructure secure.

Now, BAE Systems is not quite as ‘defensive’ as Diageo as its revenues are linked to government defence budgets. These tend to fluctuate a little. However, in today’s volatile world, governments can’t afford to take defence and security lightly. As such, I think there’s a good chance that defence budgets will remain robust over the next decade to the benefit of the sector.

BAE is another very reliable dividend payer. Since paying its first dividend in 1999, the group has paid out one every single year and lifted its payout considerably along the way. Currently, the prospective yield on offer is almost 4%, which is certainly attractive in today’s low-interest-rate environment.

BAE Systems shares currently trade on a forward-looking P/E ratio of 12.9 which I feel is a very reasonable valuation for a company of its ilk. For those over 50, I think the stock could be a great buy-and-hold investment.