Image source: Getty Images
I am building a portfolio of FTSE 100 shares with dividend income to top up my state pension when I finally retire.
That day is still more than a decade away, but if I left it tomorrow, I'd buy these three sars for dividends and long-term growth.
I recently bought a stake in a pharmaceutical company. GSK (LSE:GSK). It is no longer the dividend aristocrat it used to be when it operated as GlaxoSmithKline, as chief executive Emma Walmsley prioritizes building its medicines portfolio over rewarding shareholders.
Three Top Dividend stocks
GSK's share price hasn't changed much either, trading at similar levels to five years ago, despite being up 9% in the last year. However, I like to buy stocks before they recover, and not after. Today, GSK looks cheap, trading at just 10.56 times trailing earnings. That reduces downside risk and offers greater potential for share price growth (although these things are never guaranteed).
The forecast return of 3.76% for 2024 is below the FTSE 100 average of around 4%, but I expect growth over time. Markets estimate GSK will return 4.07% next year. The big risk is that Walmsley will not deliver on its drug portfolio. It has a series of successful tests, but it is a complicated and long-term process.
However, no stock is without risk and I would balance GSK by increasing my stake in the FTSE 100 revenue share. M&G (LSE: M&G).
I started building my position in the wealth manager last spring, after being alerted to its ultra-high yield. The share price has risen 9.7% in 12 months, but has fallen 8.8% in the last month. This is despite full-year adjusted operating profits, released on March 21, rising 27.5% to £797m.
Net customer inflows and capital generation also rose, but investors were disappointed by a small 0.1p increase in the total dividend to 19.7p per share. Given that the stock's trailing yield is a whopping 9.45%, I'm not too worried.
The risk is that markets fall from today's highs, because if that happens the M&G share price could fall faster. Since I'm taking a long-term view, I can afford to take it.
I can't ignore this performance
Finally, if I retired tomorrow I would buy a stock I don't own, Asia-focused bank HSBC Holdings (LSE: HSBA). I have been cautious about HSBC, given the importance of China to its profits and rising tensions with the West.
However, I cannot continue to snub it due to the geopolitical risk that may never come to a head. Especially with the stock forecast to return 9.71% in 2024, even if analysts estimate it will fall to 7.85% in 2025. It remains a useful source of income, and HSBC recently announced a share buyback for value of 2,000 million dollars.
HSBC's share price has been quite strong, up 15.7% over the last year. However, the stock appears to be trading cheap at just 5.9 times forward earnings.
Full-year 2023 profits were hit by a $3 billion impairment in HSBC's stake in the Bank of Communications of China, but still posted a 78% rise in pre-tax profits to $30.3 billion. of dollars.
China still has many problems due to government authoritarianism, tensions with the West and the country's aging population. Profits can fall when interest rates are reduced. However, given the income on offer, I would buy HSBC anyway.
