I’d buy these 5%+ yielding FTSE 100 dividend stocks today to beat the State Pension

These FTSE 100 (INDEXFTSE:UKX) dividend shares could deliver high returns in my view, which may help investors to overcome the disappointing State Pension.

| 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.

sdf

While the FTSE 100 may have made strong gains in recent months, there are still a number of stocks that offer income returns of over 5%. As such, now could be a good time to buy them for the long term.

FTSE 100 dividend stocks could, of course, help investors to overcome a rising State Pension age. Since the State Pension currently amounts to just £8,767 per year, obtaining a second revenue stream from income-producing assets could become a priority for many.

With that in mind, here are two FTSE 100 income stocks that could offer wide margins of safety, as well as bright investment outlooks.

Should you invest £1,000 in Rio Tinto 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 Rio Tinto made the list?

See the 6 stocks

Rio Tinto

Rio Tinto (LSE: RIO) has performed well in recent months, with its share price rising 17% since the start of the year. It’s been buoyed by changing investor expectations regarding US interest rate rises. A lack of inflationary pressure means the prospect of the Federal Reserve raising interest rates may have fallen.

This is good news for the mining sector, since it could mean the world economy experiences further growth, while commodity prices may remain appealing if the dollar fails to strengthen over the medium term.

With Rio Tinto having a dividend yield of around 5%, it could offer income investing appeal. Certainly, it lacks the resilient business model of many of its FTSE 100 index peers. But trading on a price-to-earnings (P/E) ratio of around 12.5, it seems to offer a wide margin of safety. As such, now could be a good time to buy in for the long run.

WPP

The last couple of years have been a time of major changes for global advertising business WPP (LSE: WPP). It has a refreshed strategy under a new CEO, which has caused disruption to its financial performance and also to investor sentiment.

Although its share price has ticked up in the last few weeks, it’s still down by 24% in the last year. As a consequence, it trades on a P/E ratio of just 8. This suggests it could offer significant recovery potential.

Its new strategy is expected to boost its net profit growth in the current year after a decline last year. Over the medium term, a focus on efficiency and its core operations could lead to a more robust financial outlook.

Since WPP has a dividend yield of 6.3% at present, its income investing potential appears to be high. Dividends are due to be covered twice in the current year, which suggests they’re sustainable at their current level.

As with Rio Tinto, WPP lacks a track record of resilient performance. But with a low valuation and what appears to be a sound strategy, it could generate improving income performance. As such, it could be appealing for investors who are concerned about the long-term prospects for the State Pension.

But there may be an even bigger investment opportunity that’s caught my eye:

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI 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.

Peter Stephens owns shares of Rio Tinto and WPP. 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

Group of young friends toasting each other with beers in a pub
Investing Articles

1 Warren Buffett stock I’m staying well away from

Warren Buffett’s Berkshire Hathaway has been buying shares in Constellation Brands recently. But Stephen Wright prefers its FTSE 100 counterpart.

Read more »

Santa Clara offices of NVIDIA
Investing Articles

Nvidia stock just hit an all-time high. So could it still make sense to buy?

Nvidia stock has hit an all-time high today. Our writer reckons it may still be cheap from a long-term perspective.…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

As Rolls-Royce shares smash record after record, could they be a bargain even now?

Rolls-Royce shares have performed incredibly in recent years. This writer reckons they may yet go even higher -- here's his…

Read more »

Mature black woman at home texting on her cell phone while sitting on the couch
Growth Shares

2 UK stocks that could be under pressure if fiscal problems keep rising

Jon Smith talks through a couple of UK stocks that he thinks could be under pressure if the government change…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

2 FTSE 100 shares with low P/E ratios! Which should I consider buying?

I'm hunting for the best UK value shares to buy this July. Here are a couple from the FTSE 100…

Read more »

Young Caucasian woman holding up four fingers
Investing Articles

4 stocks I bought for my Stocks and Shares ISA in June!

Our writer reveals what he thinks is the most exciting from the four investments he made in his Stocks and…

Read more »

Close-up of British bank notes
Investing Articles

5 dividend shares yielding 5.9%+ to consider in July

Christopher Ruane discussed a handful of FTSE dividends shares yielding close to 6% or higher that he reckons investors should…

Read more »

Branch of NatWest bank
Investing Articles

Up 50% in just 1 year, can the NatWest share price keep going?

Christopher Ruane looks at a couple of ways to evaluate the Natwest share price and decide whether it offers a…

Read more »