The FTSE 100 income shares I’d buy and hold forever

Rapidly rising profits are driving outsized dividend hikes at these FTSE 100 (INDEXFTSE: UKX) giants that could signal they’re long-term winners in the making.

| More on:

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

There aren’t many companies out there that make for truly buy-and-forget shares, but there are a handful of FTSE 100 giants that have proven over many decades that they can deliver outsize returns without requiring much babysitting by shareholders.

Can past performance be repeated? 

One that I think fits the bill is British American Tobacco (LSE: BATS). Now, given consumer trends, it may seem odd to recommend a tobacco company as a buy-and-hold share, but I think BATS still fits the bill.

This is because the group has shown over the past few years that it can continue to grow sales and profits despite fewer people in developed countries taking up the habit. Since 2013, the group’s revenue have grown from £15.2bn to £20.3bn last year, while operating profits over the same period leapt from £5.5bn to £6.5bn.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

The group has notched up this performance by increasing prices, growing market share in developed countries, increasing sales in emerging countries, and making acquisitions. In 2017 these moves helped boost its revenue by 6.5% on an organic, ex-acquisition basis while operating profits were up 7.8% on the same basis.

However, including the effects of the £41.8bn acquisition of Reynolds American, it saw statutory revenue rise a whopping 37.6% with operating profits up 39.1%. Aside from the significant short-term boost to earnings, the real benefit of this acquisition will be felt over many, many years as it cemented the group’s leading position in the most profitable tobacco market outside of China.

All of this growth has seen earnings per share rise significantly over the period, which has allowed management to boost dividends steadily to 195.2p last year, which works out to a 4.53% yield at today’s share price. With decent growth potential, great income and a valuation of just 14 times forward earnings, I reckon now could be a great time to begin a position in a proven long-term winner.

Listening to what shareholders want 

But if tobacco stocks don’t catch your eye, then fast-growing insurer Prudential (LSE: PRU) may. The group recently announced plans to split itself into two listed businesses. The new business will take on the UK/Europe asset management and insurance bits of the business that are being spun off, while Prudential plc will retain the Asian and American operations.

This move was a long time coming as it separates the low-growth UK and European business from the capital-light, high-growth Asian business and hugely profitable American arm. For long-term investors, I believe the latter could prove a fantastic,, durable holding as it will be well-positioned to build upon the group’s long history in Asia to continue growing profits there by double-digits.

In fact, last year Asian operating profits increased 15% as increasingly wealthy consumers from China to Vietnam sought out insurance and asset management services. In the years ahead, I see little reason for this trend to slow and Prudential’s strong presence in the region should stand it in good stead.

While the insurance sector will always be somewhat cyclical, I reckon the soon-to-be trimmed down Prudential could be a great long-term holding. Add in already impressive growth over the short term and a 2.6% dividend yield, and Prudential is one stock I’d stash in my retirement account for a long, long time.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: May’s lower-risk, higher-yield Share Advisor recommendation [PREMIUM PICKS]

Ice ideas will usually offer a steadier flow of income and is likely to be a slower-moving but more stable…

Read more »

Blue NIO sports car in Oslo showroom
US Stock

Is NIO stock an unmissable bargain below $4?

Jon Smith addresses some of the recent chatter about NIO stock and explains why he's not convinced now's the best…

Read more »

Black woman using smartphone at home, watching stock charts.
Investing Articles

£10,000 invested in Greggs shares today could deliver £363 in dividends in 2027

Greggs shares have dipped significantly over the past 12 months, but this has pushed the dividend yield way up, creating…

Read more »

Tesla car at super charger station
Investing Articles

More bad news! Is it now game over for Tesla stock?

Tesla stock is still trading at a mighty premium, despite more recent negative developments. Yet there are some bright spots…

Read more »

Engineer Project Manager Talks With Scientist working on Computer
Investing Articles

Down 29% in a year, meet the S&P 500 stock I’m considering buying June

UK investors might not be familiar with Danaher. But the S&P 500 stock is top of Stephen Wright’s buying list…

Read more »

Bournemouth at night with a fireworks display from the pier
Investing Articles

Up 45% with a P/E just over 12 – this FTSE 250 stock is on fire!

Harvey Jones is kicking himself for failing to buy this FTSE 250 stock last October. It’s been the perfect way…

Read more »

Group of friends meet up in a pub
Investing Articles

Down 50%, are Diageo shares a bargain in plain sight?

With the shares trading at multi-year lows, this writer examines the latest trading update from Diageo, together with its long-term…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

3 reasons to consider HSBC shares for passive income

Aiming to generate extra passive income? This writer thinks HSBC shares from the FTSE 100 index are worth a look…

Read more »