After years of dithering, I finally jumped off the fence and bought Lloyds (LSE: LLOY) shares because I thought at 46p they were too cheap to ignore. There comes a point where you cannot hang around any longer.

I thought Lloyds shares looked like a bargain for a long-term investor like me, as they had fallen by a third over the last five years. That left the UK-focused high street bank trading at just 5.8 times earnings, with a similarly low price-to-book value of 0.5.

I’ve finally bought Lloyds shares!

Like any stock purchase, there were risks to buying Lloyds shares. The recession will no doubt lead to an increase in debt impairments, for example. If interest rates peak sooner than expected, Lloyds may lose the opportunity to widen its net interest margins.

The income swung it for me. Lloyds was viewed as a dividend machine before the financial crisis. After a long journey back to respectability, it is becoming one all over again.

The forecast yield is now 5.7% and cover still looks strong at 2.9 times earnings, giving scope for progression.

Lloyds shares are now safely tucked in my portfolio and I don’t need to pay them much attention for years. I will simply reinvest my dividends for growth, and wait for my stake to roll up in value.

I’m still looking to buy FTSE 100 dividend stocks, though, and insurer Legal & General Group (LSE: LLOY) is now staring at me from my watchlist. This is another top income stock I’ve been watching for donkey’s years, and now I’m more keen than ever.

L&G is already an income machine. Its dividend per share has steadily climbed from 15.35p five years ago to 18.45p in 2021. Management stuck by it during the pandemic, even when rival insurer Aviva suspended its shareholder payouts. Management came under some pressure but stuck to its guns and put loyal investors first.

I’d buy L&G for higher income

L&G now offers a whopping forecast yield of 7.2%, covered 1.7 times by earnings. If I reinvested all my dividends, I’d almost double my money in a decade even if the share price did not move at all. The dividend is forecast to keep climbing to 19.5p in 2022 and 20.9p in 2022, so I’d probably do it even faster.

L&G shares aren’t exactly shooting the lights out, growth-wise. In the last five years, they have fallen 2.5%. Over 12 months, they are down 13.3%. The plus side is that this suggests I am not overpaying for the stock. Especially since it is now trading at just 7.4 times earnings, well below the 15 times that is considered fair value.

L&G expects operating profits to grow 8% this year, with full-year capital generation of £1.8bn. That’s a solid performance. The group is also a major global investor, with around £1.3trn in total assets under management. The balance sheet looks healthy, with an estimated solvency coverage ratio of between 225% and 230%.

Legal & General’s low valuation makes me want to buy it right now, but sadly all my cash is earmarked for Christmas. It may therefore be my first stock purchase of 2023.

The post I’ve just bought Lloyds shares. Next I’m buying this cheap UK stock  appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• How much would you need in a Stocks and Shares ISA to match the State Pension?

Harvey Jones holds shares in Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. 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.

I’m feeling surprisingly bullish for a foggy November day, and in a mood to buy bargain UK dividend shares.

When I look at some of my favourite FTSE 100 income stocks, many appear to be trading at irresistible prices. At the same time, they offer blockbuster yields.

In the last month I’ve bought the two biggest yielders of all, housebuilder Persimmon and miner Rio Tinto. I don’t intend to stop there. When opportunity comes knocking, it seems rude not to respond.

I’m on the hunt for dividend shares

I recently flagged up Lloyds Banking Group (LSE: LLOY) as a dividend stock I’m ready to buy. The bank trades at just 5.8 times earnings and yields a well-covered 4.65% a year. 

Naturally, it comes with risks. The recession could lead to a sharp rise in debt impairments among its small business and retail customers. On the other hand, higher base rates should help Lloyds boost net interest margins.

Given that I plan to hold the stock for decades, short-term issues like these don’t mean that much to me. I’m delighted to have an opportunity to buy this dividend stock at what looks like a tempting valuation to me.

Household goods giant Unilever (LSE: ULVR) is also on my buy list. For years it was expensive, trading at around 25 times earnings while yielding just over 2%. Its recent troubles have produced a much more attractive entry point.

Today, Unilever yields a halfway decent 3.65% and trades at a relatively cheap 17.18 times earnings. Management has a challenge on its hands, as the group has lost its way over the last year or two, but it’s not exactly in mortal peril. 

A full-blown Unilever share price recovery could be several years off, but I’ll bide my time while management gets its act together. Once I’ve bought the stock, I can start reinvesting the dividends to build my stake ahead of any recovery.

I’m keen to add another FTSE 100 high yielder to my buy list, ideally one paying higher income than these two.

Huge yields to be had

Insurer Legal & General Group (LSE: LGEN) has long been a favourite of mine. If I’d been sharper, I would have bought the stock during the pensions meltdown that followed ex-Chancellor Kwasi Kwarteng’s disastrous mini-budget. Legal & General shares have rebounded 22% since Jeremy Hunt brought stability. 

They’re still down 16% year-to-date and are 6% lower than five years ago. It’s valued at 7.29 times earnings and yields 7.46% a year, covered 1.8 times by earnings. I need to dig a bit deeper than this before shifting it to my buy list, but so far the signs are positive. The L&G share price hasn’t grown much in years. But it’s the income I’m after.

The FTSE 100 has recovered in recent days and is up 7.1% over the last month. Yet all three of these dividend shares still look cheap to me. I expect to buy the set before the year is out. If the FTSE 100 dips, I’ll act sooner rather than later.

The post Dividend shares look cheap to me. Here are 3 I’m keen to buy  appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• 3,566 shares in this FTSE 100 stalwart earns a £1,443 second income
• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years

Harvey Jones holds shares in Persimmon and Rio Tinto. The Motley Fool UK has recommended Lloyds Banking Group and Unilever. 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.

I’m no longer 40 years old but if I was and had no retirement savings, I’d follow the same strategy as I do in my 50s, and invest in FTSE 100 stocks.

Although the first thing I would do is kick myself, for leaving it so long to take investing seriously. That’s because I have learned that the longer my money sits in the market, the more time it has to compound in value. That is particularly important when investing in the FTSE 100, as it is packed full of top dividend stocks paying mighty yields.

I’d pile into FTSE 100 stocks

Some of my favourite companies on the index haven’t delivered much share price growth over the last five years or so. Many have fallen sharply over the last 12 months. That doesn’t put me off, because they now look dirt cheap and their yields are huge. Many of my favourite FTSE 100 stocks yield between 5% and 8%. Some pay even more than that.

If I was 40, I would reinvest all my dividends straight back into my portfolio, again, exactly as I do today. My reinvested dividends would pick up more stock, which would pay more dividends, which I would reinvest to buy yet more stock.

This is a virtuous circle and even I started from scratch at 40, I would still expect to build a decent pot of money by the time I reached state pension age.

Let’s say my FTSE 100 shares delivered a total return of 7% a year, which is roughly the long-term average across the index. If I invested a lump sum of £10,000, that would grow to £62,139 by age 67 years. That’s a pretty decent return.

If I followed that up by investing £300 a month, which is £3,600 a year, I would end up with a thumping £349,050. Again, this assumes 7% a year growth.

I’d buy cheap value stocks

Here’s another thing I would do. I would increase the amount I invested each year, to keep up with inflation. Let’s say I increased that £300 monthly contribution by 3% a year. By the time I hit 67, I would have £446,624 in total. 

Of this, £290,069 would have been pure profit from compound growth. That’s an impressive two-thirds of my total portfolio.

I think now is a tempting time to start buying FTSE 100 stocks because the index is packed full of bargains. I can scarcely believe my eyes when I see dividend aristocrat Legal & General Group trading at 6.87 times earnings and yielding 7.94%. Or housebuilder Taylor Wimpey, whose valuation has tumbled to just 5.28 times earnings, while it yields 8.91% a year.

Mining giant Rio Tinto is currently valued at just 4.09 times earnings and yields a staggering 12.09%.

Of course, dividends are not guaranteed, and share prices can always fall. No stock is ever totally safe. That’s why I would invest in a balanced spread of FTSE 100 stocks, to spread my risk. I would also pay in as much as I could afford today, to ensure a comfortable retirement tomorrow. That would apply whether I was 30, 40, 50, or older.

The post No savings at 40? I’d buy FTSE 100 stocks at today’s dirt-cheap prices appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Harvey Jones doesn't hold any of the shares mentioned in this article. 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.

As the UK tax burden hits a 70-year high, the Stocks and Shares ISA allowance looks more valuable than ever.

I use mine to invest in global shares using low-cost exchange traded funds (ETFs) and investment trusts. But for the UK, I prefer individual shares. 

Tax-free income inside a Stocks and Shares ISA

Inflation is rocketing, and buying dividend income shares is a good way of protecting the real value of my money. Many top FTSE 100 income stocks offer eye-catching yields, while trading at temptingly low valuations. That’s where I would target my efforts in June.

I find asset manager and insurer Legal & General Group almost impossible to resist right now. It offers an income of 7.04% a year, yet trades at just 7.56 times earnings. That would fit very nicely inside my Stocks and Shares ISA allowance. 

L&G’s share price has performed poorly for years. But now it is showing signs of life, as profits recover after the pandemic. At today’s low entry price I don’t feel that I’m overpaying. I hope to benefit when it finally swings back into fashion, but I’m in no major rush. While I wait, I’ll keep reinvesting my dividends to buy more stock.

I would take my next Stocks and Shares ISA pick from the mining sector. Globally diversified metals and minerals expert Rio Tinto offers a frankly incredible yield of 11.10%, yet is valued at an equally incredible 5.4 times earnings. 

Investors are worried that falling demand from China will hit the price of steel and other metals, denting revenues. A global recession would aggravate that. Yet I always expect ups and downs with commodity stocks. That’s what I would aim to hold Rio for the long term (by which I mean decades). June looks like a good time to buy it.

I’d buy this UK dividend share too

I would balance that with some defensive solidity, and make GlaxoSmithKline my final Stocks and Shares ISA pick for June. The pharmaceutical giant yields 4.62% and trades at 15.49 times earnings. Personally, I would always hold Glaxo. I would rather have bought it a year ago when the share price was around 30% lower. But I still think it offers good value today. 

Glaxo chief executive Emma Walmsley is talking of a landmark year, as the group spins off its consumer healthcare unit. Its speciality medicines and vaccines are showing “good momentum”, with Q1 vaccines division sales up 36% at £1.7bn.

Let’s hope Walmsley finally rewards loyal investors by hiking the dividend. That would give me even more income, which I’d reinvest for long-term growth inside my Stocks and Shares ISA.

The post I’d buy these 3 UK income shares for my Stocks and Shares ISA in June appeared first on The Twelfth Magpie.

More reading

• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• How much would you need in a Stocks and Shares ISA to match the State Pension?
• Here’s a quick and easy way to start earning passive income this summer with a spare £1,000
• How much would I need to invest in these FTSE 100 dividend gems for a £29,061 ISA passive income?

Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has recommended GlaxoSmithKline. 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.

FTSE dividend shares offer some incredible yields right now. Solid, defensive businesses like GlaxoSmithKline and Unilever currently pay income of around 5% a year. Insurer Aviva pays 5.22%, while one of my favourite FTSE dividend shares, Legal & General Group, pays an incredible 6.71%. These are just the first that spring to mind. Some stocks yield 8%, or more. I’m looking at you Imperial Brands Group (8.68%), and you Persimmon (10.34%).

I’m buying FTSE dividend shares

At the same time, the returns on cash are low. Even though the Bank of England has hiked base rates for three months in a row, Halifax, Lloyds, NatWest, Bank of Scotland and Santander are still paying just 0.01% on easy access.

Savers now have an estimated £250bn sitting in savings accounts that pay no interest, Hargreaves Lansdown figures show. I believe it makes sense to have a bit of rainy-day cash on instant access, to fund emergencies such as a broken boiler or car repairs.

Yet I’m not leaving my long-term wealth on deposit, because I feel it can work so much harder elsewhere. Investing in FTSE dividend shares is riskier than leaving money in the bank. Stock markets can go up and down (in fact, they do it all the time). They can crash (they do that pretty regularly too). Individual companies can run into trouble. Profits can plunge. Management may cut dividends. Even apparently big, solid firms can go out of business.

Cash is a safe haven, but with inflation set to hit 8% later this year, and possibly even 10%, it also carries risk. If I leave money sitting in a savings account paying 0.01%, the value of my money will plunge in real terms. Inflation is called the silent assassin because you do not see it at work. If I have £10,000 in the bank earning zero interest and look at it one year later, my statement will still say £10,000. But if inflation averaged 10% in that time, it would only buy me £9,000 worth of goods and services. So I’m relying on FTSE dividend shares to help my money maintain its value as prices rise.

I’m facing down the inflation threat

Right now, FTSE 100 dividend shares offer an average yield of 3.22%. Better still, that is a rising income, because most companies aim to increase their dividend payouts over time. I also have instant access to my money.

There is another reason why I favour FTSE dividend shares. I should get capital growth as well, if their share prices rise. That is far from guaranteed, of course. My stock picks may fall in value, possibly dramatically. Some may never recover.

Yet I limit my exposure by buying a spread of 15-20 FTSE dividend shares and hope my winners outweigh my losers. And I will keep reinvesting my dividends for growth, turbo-charging my returns. I’m hoping they will protect me against the growing inflation menace. 

The post I’m not accepting 0.01% on cash when FTSE dividend shares pay 6% or 7% appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has recommended GlaxoSmithKline, Imperial Brands, Lloyds Banking Group, and Unilever. 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.

It’s a tough call to make as there are so many top income stocks out there. Right now, fund manager M&G and housebuilder Persimmon both yield more than 10%. Imperial Brands and Rio Tinto yield more than 9%. Abrdn and Phoenix Group Holdings pay more than 8% a year. These are incredible returns, at a time when a best-buy easy-access savings account pays just 0.65%.

I’d buy this FTSE 100 Legal eagle

If I could only pluck one dividend stock from the index, I would go for Legal & General Group (LSE: LGEN). The £14.55bn insurance giant isn’t the whizziest stock, but it’s a solid name, with a solid business, and pays a solid level of passive income.

Today, L&G yields 7.2% a year, with dividend cover of 1.3 times. The forecast dividend yield is even more promising at 7.9%, with cover of 1.8.

It’s a pretty reliable dividend too. Unlike FTSE 100-listed insurers Aviva and RSA, L&G maintained its dividends through the pandemic. Management also kept staff on and shunned furlough support.

It didn’t emerge completely unscathed. The group’s final 2020 dividend payment was held flat due to Covid, and management also cut its dividend growth target for the next five years. Yet today’s passive income level still looks enticing to me.

What isn’t so enticing is its growth potential. The Legal & General share price trades at similar levels to five years ago. There have been up and downs along the way, but few signs of a breakout. Yet I’m looking for passive income here, rather than active growth.

The L&G share price crashed on Friday, by 5.62%, compared to a drop of 3.48% across the FTSE 100 as a whole. Yet I reckon current fears could be a buying opportunity, and L&G’s valuation looks tempting to me. It currently trades at a relatively low forward valuation of 8.3 times earnings, well below the FTSE 100 average P/E of 14.3. Its price-to-sales ratio is 1.1. That’s hardly demanding.

This is a top passive income stock

Legal & General is widely diversified across a broad range of personal finance areas, selling everything from general insurance and protection to investment funds, pensions, equity release and bulk annuities. It’s also a direct investor in housing and commercial real estate.

Interestingly, it’s one of just a handful of companies that continue to sell annuities, which could now swing back into fashion as interest rates finally pick up. The group is also well capitalised, and has forecast operating margins of 18.5%, and return on capital of 10.6%. This should help keep that passive income sustainable.

I’m not getting carried away. Legal & General is one of those stodgy, boring stocks that investors overlook when markets are flying. That may be an advantage right now. One year ago, it reported a 2% dip in full-year operating profits to £2.4bn. We will find out how well the last year has gone when it reports on Wednesday.

Another risk is that lack of share price growth — and the worse-than-average fall last week that I mentioned above. If it fails to grow in price, its dividends may not be enough.

Either way, I’d buy it for passive income ahead of any other FTSE 100 stock today. Then hold it for years and years.

The post If I could only buy one FTSE 100 dividend stock for passive income, I’d choose this appeared first on The Twelfth Magpie.

More reading

• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• How much would you need in a Stocks and Shares ISA to match the State Pension?
• Here’s a quick and easy way to start earning passive income this summer with a spare £1,000
• How much would I need to invest in these FTSE 100 dividend gems for a £29,061 ISA passive income?

Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has recommended Imperial Brands. 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.

The FTSE 100 started the year well. Global investors finally woke up to the opportunities on the blue-chip benchmark index after years when their attention was elsewhere. I think they shouldn’t have left it so long — the opportunities were there all along.

The FTSE 100 is still up 9.77% over the last year, despite crashing on Friday, when the index fell almost 3% to near the 7,000 mark.

It is hardly surprising that UK shares crashed, given the impact of the Russian invasion of Ukraine on the global economy. We have been plunged back into a terrifying world we thought we had left behind, and fear and uncertainty is rife.

FTSE 100 looks a buy to me

At times like these, it is tempting to shun the stock market altogether. I’ve been caught up in the general sense of dread and panic myself, but have resisted the temptation to sell. I am still 10-15 years away from retirement, and I hope that gives me long enough to recover from the next market crash (and the next one, and the next…).

I’ve stood by my portfolio of FTSE 100 shares through the dot.com crash, 9/11 attacks, financial crisis, Covid pandemic, and now war in Ukraine. I’m ignoring doomsayers saying that people should pile into cash and gold, and holding my course.

I will also top up my holdings in UK shares from time to time. The FTSE 100 still looks pretty good value to me, trading at a price/earnings ratio of 14.82. The S&P 500 currently trades at more than double that, with a Shiller P/E of 35.18. It seems overvalued to me.

One reason the FTSE 100 has underperformed the US over the last decade is that it does not have the same exposure to fast-growing technology stocks. However, that sector now looks played out, whereas defensive, value stocks are swinging back into favour. I’m thinking of the banks, oil majors, mining companies, and insurers. The UK has plenty of those.

I fancy Barclays and Lloyds Banking Group, Shell, Rio Tinto, and Anglo American, and two old favourites Aviva and Legal & General Group. They may not be the most exciting stocks in the world, but they look strangely reassuring right now.

I’m backing UK shares

I will look to buy more FTSE 100 shares when I can, while accepting that any of my stock picks could crash if the political situation gets even worse. If it does, I may screw up my courage take the opportunity to pick up a few more of my favourite companies. Again, my aim is to hold for the long, long term.

The FTSE 100 is currently expected to yield 4.1% in 2022. That’s a terrific rate of income, at a time when a best buy easy access savings account pays around 0.60% a year. And of course it should rise over time, as companies increase their dividends. That’s why I’m standing by it, through thick and thin.

The post I reckon the FTSE 100 offers good value today. That’s why I’m buying and holding UK shares appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has recommended Barclays and Lloyds Banking Group. 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.

Insurer and asset manager Legal & General Group (LSE: LGEN) is possibly my number one British dividend income stock. To its credit, L&G continued to reward loyal shareholders throughout the pandemic, even when rival Aviva bowed to pressure and cut its dividend. 

Today, L&G offers a thumping forward yield of 6.5%. With the average savings account paying 0.06%, that is a mighty return. Naturally, as with all dividends, there are no guarantees. However, the payout is covered 1.7 times by forecast earnings, which boosts my confidence.

I’d buy these two FTSE 100 stocks

Legal & General didn’t survive the pandemic completely unscathed. In March, it reported a 3% drop in annual operating profits to £2.21bn, while it has set aside an extra £110m to cover claims caused by mutant Covid strains. Yet its fund management arm has done well, with assets under management increasing 6.9% to £1.3bn. Better still, the underlying business remains solid, with capital levels climbing to a meaty 192%. This could free up funds to invest in faster growth opportunities.

As well as being a top British dividend income stock, the Legal & General share price has delivered growth as well. It is up 36% over the last year, although five-year growth is actually lower at 20%. For me, L&G is mostly about income, and on that front, it delivers.

I am sticking with the insurance industry for my next pick, Phoenix Group Holdings (LSE: PHNX). This also merits the title of top British dividend income stock for maintaining payouts through last year’s woes. Today it yields 6.6%, although cover is slightly thinner at 1.3 times earnings.

I’d buy this top British dividend income stock, too

Phoenix is a different creature to L&G. Its strategy is to buy up old life insurance and pension funds that are closed to new business, and run them on behalf of members. The more it buys, the greater the economies of scale. It now services 14m policyholders.

The Phoenix share price is never going to shoot the lights out. The income is the attraction here, as the share price has climbed just 15% measured over both one and five years. Management knows that, and kept investors onside by taking advantage of record £1.7bn cash flows to hike its annual payout by 3%.

The challenge is that Phoenix must keep buying up legacy life pension and life funds in order to keep growing and funding those dividends. So I am pleased to see that it also has an ‘open’ business offering pension and investment products to new customers, under the Standard Life brand. In 2016, it acquired SunLife from Axa. This diversification should help it remain a top British dividend income stock over the longer term.

The post 2 top British dividend income stocks I’d buy today appeared first on The Twelfth Magpie.

More reading

• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• How much would I need to invest in this FTSE 100 dividend star to aim for £15,401 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• How much would you need in a Stocks and Shares ISA to match the State Pension?
• Here’s a quick and easy way to start earning passive income this summer with a spare £1,000

Harvey Jones 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.

Traders on Reddit and other social media platforms have been piling into the stocks of troubled companies, notably US video game retailer GameStop, and driving them to insane highs. Some have made fortunes along the way. Others will lose fortunes as the GameStop share price crashes back down.

This isn’t how I plan to build my long-term wealth. I still believe the best way to do this is slowly and surely, by investing in top UK stocks for dividends and growth.

I’d buy this FTSE 100 income stock instead

There’s no Reddit trader frenzy around the Legal & General Group (LSE: LGEN) share price right now. I think there never will be. The FTSE 100-listed insurance company shouldn’t see its stock rise by thousands of per cent in my lifetime. Let alone in months, as GameStop has. Over five years, L&G shares have increased by just over 7%. They’re down 18% over the last year, thanks largely to the pandemic, but have been picking up in recent months in what I hope is the start of a long-term, post-pandemic recovery.

So why would I buy it? Legal & General is a British blue-chip company that generates most of its revenues by selling low-cost tracker funds, pensions, annuities, life assurance and equity release lifetime mortgages.

Yep, boring. Certainly compared to being a Reddit trader.

Even a solid, boring business like L&G comes with risks. It has been hit by falling stock markets and rock bottom interest rates. The company’s latest six-month report showed operating profits down 6% to £946m. These headwinds are not going to suddenly disappear. Stock markets are in retreat as I write this, while interest rates look set to remain low for several years.

Despite this, I’m shunning all dreams of becoming a super-rich Reddit trader and buying L&G instead. Why this company? First, I don’t pick stocks for how they perform over the next year, but the next 10 years. Over such a timescale, I’m hoping that the Legal & General share price will have much further to climb, as profits rebound and are either reinvested back into the company or distributed among shareholders.

Reddit trading frenzy isn’t for me

Second, today’s entry price is highly tempting to me, at just 8.22 times earnings. The FTSE 100 as a whole trades at more than 18 times earnings.

The other big attraction is the dividend. Currently, L&G yields 7%, covered 1.6 times by earnings. I can take this free of tax inside a Stocks and Shares ISA. This is underpinned by a £7.3bn capital surplus and a £3.5bn credit default reserve. Better still, management has maintained shareholder payouts despite the pandemic.

No dividend is guaranteed. Management looks set to hold this year’s dividend at last year’s level. However, I think Legal & General should offer an attractive income stream for years, even if it dips from today’s highs. I’m interested to see whether the Reddit trader army will last as long.

The post Why I’m avoiding the Reddit trader frenzy and buying this top UK stock instead appeared first on The Twelfth Magpie.

More reading

• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• How much would you need in a Stocks and Shares ISA to match the State Pension?
• Here’s a quick and easy way to start earning passive income this summer with a spare £1,000
• How much would I need to invest in these FTSE 100 dividend gems for a £29,061 ISA passive income?

Harvey Jones 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.

There are still plenty of bargain FTSE 100 stocks out there. I think these three should give me the dividend income and share price I’m after to achieve financial freedom and retire at a time of my choosing.

My first pick is FTSE 100 ‘big pharma’ stock GlaxoSmithKline (LSE: GSK). AstraZeneca has dominated the headlines lately, following its Oxford vaccine breakthrough, but Glaxo looks the superior dividend stock today, I feel.

Today, Glaxo yields 5.77%, and unlike many FTSE 100 stocks has maintained shareholder payouts throughout the pandemic. Chief executive Emma Walmsley may have held the dividend at 80p for five years, now, but I’m not complaining given that yield. 

The Glaxo share price has fallen by around a fifth in recent months and I reckon this gives me a great buying opportunity. Today, it trades at just 11.1 times earnings. Believe me, that is cheap for Glaxo. Usually I would consider myself lucky to buy it at 15 times. 

I’d buy these FTSE 100 stocks in 2021

My next FTSE 100 stock pick is more controversial. Oil giant BP (LSE: BP) is facing an existential threat from the rise of renewables, and the war on climate change. Chief executive Bernard Looney is desperately trying to repurpose BP for the net carbon zero world, and there is no guarantee he will win.

Yet I still believe BP can generate healthy income and growth from its legacy fossil fuel business, while switching to greener forms of energy. In the interim, BP offers a whopping forecast yield of 8.4%, despite halving its dividend in August. 

The BP share price is climbing right now and could rebound further as the world starts travelling again. Brent crude is nudging $50 a barrel and the higher it climbs the better this FTSE 100 stock will perform.

I’ll be crying financial freedom

Asset manager and insurer Legal & General Group (LSE: LGEN) has maintained its income throughout the pandemic, holding its nerve even as rival Aviva slashed its payout. Today, it offers investors a juicy forward yield of 6.9%, covered 1.6 times by earnings.

The L&G share price has jumped almost 40% in the last month, which I’m glad to see, given that I have been tipping the stock for years. So it’s not as cheap as it was, but this FTSE 100 stock still looks nicely priced, trading at 8.63 times earnings.

Legal & General has shown its resilience through what should have been a tough year for asset managers. The combination of a low entry price, solid long-term prospects and generous dividend policy makes it a top retirement stock for my portfolio. I’d buy these three in 2021 and move a step closer to achieving financial freedom.

The post I’d buy these 5 FTSE 100 stocks in 2021 to achieve financial freedom appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• Here’s why I bought this 7.6%-yielding FTSE 100 dividend stock instead of saving in a Cash ISA
• Just how bad could it get for the BP share price?
• How much would you need in a Stocks and Shares ISA to match the State Pension?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.