If you’re concerned about the State Pension in the UK, and whether it’ll afford you a comfortable retirement once you’ve hung up the theoretical work apron for the last time, I’ve one thing to say. Good!
I’m not trying to be flippant or combative. So many British citizens are just waltzing carefree into the trap of pensioner poverty, without any inclination of how difficult it will be to live just on state benefits when they’re old and grey. Being worried about being plunged onto the breadline is the first step to doing something about it.
I’m certainly worried about the paltry £164.35 a week that the State Pension provides. I’m not expecting the Department for Work and Pensions to significantly loosen the pursestrings in the coming decades, either. Because of this I’ve loaded up on some of the FTSE 100’s big dividend hitters, from giant yielders like Taylor Wimpey (LON:TW) to proven payout growers like Bunzl (LON:BNZL). There’s plenty of other blue-chip income plays on my radar, too, including the two I discuss here.
Chubby yields If you’re looking to grab big yields straight away then you could do a lot worse than to plough your cash into AstraZeneca (LSE: AZN).
With City brokers expecting the pharmaceuticals developer to pay dividends of 280 US cents through to the end of next year, mirroring the payouts of the last half a decade, investors can lap up a juicy yield of 3.6%. That sits at twice the current rate of consumer price inflation in the UK.
Some may be turned off by suggestions that AstraZeneca still isn’t expected to begin growing dividends again for some time yet.
I would urge patience, however. With sales of new medicines jumping through the roof (up 81% in 2018, according to full-year financials released last week), and sales to emerging markets also soaring (up 12%), I think a return to a progressive dividend policy can be expected as its ever-improving pipeline helps profit growth to accelerate over the next few years.
Great dividend growth Near-term yields over at Ashtead Group (LSE: LON:AHT) may not be as big as those at AstraZeneca. But the rate at which it has raised dividends in recent years — up 200% over the last five fiscal years, to be exact — still makes it a great income share to buy for the years ahead.
A combination of stunning earnings growth and exceptional cash generation over the period underpinned these bright dividend advances. Half-year trading details released in December showed that the rental equipment play continues to make great progress here. Indeed, another strong trading period prompted Ashtead to hike the interim dividend 18% to 6.5p per share.
The strength of its end markets mean City analysts predict full-year payouts of 37.8p per share this year, and 41.1p next year, up from 33p last year and projections that yield 1.9% and 2%, respectively. And with its aggressive attitude towards organic investment and acquisitions enhancing its long-term growth prospects, I’m confident that Ashtead will have what it takes to keep growing profits and thus dividends at a stratospheric rate many years into the future.
Royston Wild owns shares of Bunzl and Taylor Wimpey. The Motley Fool UK has recommended AstraZeneca. 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.
Motley Fool UK 2019