If I had £3k to invest in UK shares, or any other sum, I’d consider myself spoilt for choice right now. The FTSE 100 is still down more than 12% on last year, and many top companies are trading at attractive valuations.
We live in uncertain times, but history shows this is often the best time to invest in UK shares. If you wait until the post-Covid recovery is locked in, then you will have missed a great buying opportunity. Here are three FTSE 100 stocks I’d consider buying today. They should generate a rising, passive income to help fund my retirement over time.
Earn passive income in retirement
Shares in plumbing and heating products distributor Ferguson (LSE: FERG) are a play on the US recovery, because that’s where the company makes its money. This could be good news as President-elect Joe Biden pumps up the economy with yet more stimulus. The Federal Reserve looks set to remain dovish even when inflation picks up.
The Ferguson share price has climbed in a straight line since the March crash, more than doubling since then. Yet it still yields a decent 2.25%, beating many top UK shares. Last month it posted 12% growth in first-quarter trading profit to $504m, showing resilience. Ferguson is flush with cash after selling UK operation Wolseley for £308m, and looks set to reward shareholders with a special dividend. It does that from time to time.
The big UK supermarkets have emerged from the pandemic with improved reputations after keeping us fed and watered. The sector may struggle to deliver meaningful share price growth over the longer run, but Morrisons (LSE: MRW) makes up for that by paying attractive dividends. The FTSE 100 stock is now forecast to yield 3.9%, covered 1.9 times by earnings. While some UK shares have stopped payouts in the pandemic, this one hasn’t.
Today could be a good time for me to check out the Morrisons share price, as it trades at a relatively cheap 12.9 times earnings. It has been outpacing its rivals, too. Latest sales figures from Kantar show that December was the busiest month ever for British supermarkets. Morrisons led the charge, with sales up 13.1% over the 12-week period, beating next-placed Tesco, where sales rose 11.1%.
I’d buy these UK shares for dividends
I particularly favour utility stocks for income. Water company United Utilities Group (LSE: PNN) doesn’t disappoint me, currently yielding 4.5%. Management showed its commitment to shareholders in November, hiking its dividend despite reporting a 16% fall in first-half underlying profit after tax to £174m.
This reflects new price controls, which all but guarantee a steady income stream. One worry is that bad customer debts may increase as the pandemic inflicts damage on incomes. Otherwise this stock offers security. The United Utilities share price is hardly overpriced, trading at 14.9 times earnings, making it cheaper than many UK shares.
Its current regulatory plan with Ofwat runs until 2025, so there are no regulatory concerns for several years. This looks like a solid way to build a passive income stream in the run up to me retirement and beyond.