If you’ve reached 60 years of age with no pension savings, there’s no need to worry. There’s still plenty of time to save for the future.
Investing your money can be one of the best ways to build a substantial savings pot in a relatively short amount of time.
With that being the case, here are two FTSE 100 stocks that could give you a passive income stream in retirement.
Should you invest £1,000 in BT right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BT made the list?
Diageo
Global drinks giant Diageo (LSE: DGE) isn’t a household name, but the company’s products are. The group owns some of the most recognisable alcohol brands in the world. This gives it a sizeable competitive advantage.
As such, the company looks attractive as an income investment. The stock might not offer the highest dividend yield on the market, but the distribution is backed by robust cash flows from its alcohol business.
The stock supports a dividend yield of 2.3%, and the distribution is covered 1.9 times earnings per share. That implies management has plenty of headroom to increase the distribution further in the years ahead.
As well as this dividend yield, the company has also recently been returning cash to investors by buying back stock.
These buybacks, as well as efficiency savings and revenue growth, helped Diageo achieve a 19% increase in earnings per share in its last financial year. Analysts are forecasting growth of around 7% per annum for the next two years. The dividend could grow at a similar rate.
These numbers suggest the stock can provide shareholders with a growing passive income in retirement.
SEGRO
A large number of retirees acquire property to provide a passive income in retirement, but a better option could be real estate investment trust SEGRO (LSE: SGRO).
This business invests in logistics assets across Europe. Over the past six years, its growth has been highly impressive. SEGRO’s book value per share has grown at a compound annual rate of 17% since 2013.
As the company has acquired and developed new logistics assets, it has been able to raise its dividend. For the past six years, the dividend has grown at a compound annual rate of 6%.
As most of the firm’s tenants pay rent linked to inflation, it seems highly likely this dividend growth trend will continue. The development of new properties will also drive further book value growth, which suggests the stock could offer income as well as capital growth over the long run.
The real estate investment trust currently offers shareholders a dividend yield of 2.2%, which is will hit 2.4% in 2020.
Meanwhile, SEGRO is dealing at a price-to-book ratio (P/B) of 1.4, which is a bit on the pricy side. However, the company’s development plans coupled with its track record of creating value for shareholders, suggests the business deserves this multiple.
Therefore, if you’re looking for a stock that has the potential to provide capital growth as well as a steady income stream, SEGRO could be worth your research time.
