A rising State Pension age means that an early retirement may become less likely for many individuals. Rather than having to work to 65, many people will now need to work to 68, with the State Pension age set to rise to that level within the next two decades.
However, one possible solution could be to buy FTSE 100 shares that appear to offer wide margins of safety. They could provide improving total returns in the long run, with Vodafone (LSE: LON:VOD) one possible example. It has a high yield, while a recent update suggested that it could offer an improving performance.
Could it therefore be worth buying alongside a small-cap share which released an update on Monday? Or, is retiring early becoming an impossible dream for many investors?
Improving prospects? The small-cap in question is advanced computer vision technology company Seeing Machines (LSE: SEE). It released news that it will provide eye- and face-tracking sensor technologies to the Royal Australian Air Force (RAAF) for a new Pilot Training System. This is the first commercial programme agreement for the company’s aviation division, with its operator monitoring technology set to initially be installed in two Pilatus PC-21 flight training simulators. It’s expected to improve overall training efficiencies, as well as reduce cost and failure rate over the medium term.
Looking ahead, Seeing Machines may be well-placed to capitalise on increasing demand for its technology. Artificial Intelligence (AI) is becoming increasingly prevalent in a number of different industries and applications, with the business having the capacity to enjoy a tailwind over the long run as demand increases. While relatively risky and volatile, the stock could offer growth potential in the long run, in my opinion.
High income return With Vodafone’s share price having declined by 29% in the last year, the stock now has a dividend yield which is twice that of the FTSE 100. It now yields 8.4%, which is exceptionally high compared to its historic levels. Indeed, it appears as though investors are expecting a severe dividend cut as a result of the company overstretching itself following its decision to move ahead with acquisitions in recent years.
While dividends could be reduced in the medium term, the company’s recent update suggested that its financial and operational prospects remain sound. Therefore, while there’s uncertainty surrounding the investment required to maintain a competitive position as the world gradually moves onto 5G, the prospects for the business may be stronger than the stock market is pricing in.
As such, now could prove to be the right time to buy the stock for the long term. It may experience further uncertainty due to investor sentiment being weak. But with a high yield, what appears to be a margin of safety, and the potential to deliver on its strategic goals in the coming years, it could offer high total returns relative to the wider FTSE 100.
Peter Stephens owns shares of Vodafone. 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.