The BAE Systems (LSE:BA.) share price is one of the biggest FTSE 100 gainers this year, and for good reason.

Results out this week show the UK defence giant is on track for a big uplift in annual profits. Countries continue to increase military orders with Russia’s war in Ukraine, and the recent conflict in Gaza.

The company manufactures fighter jets and submarines, among other large military equipment and machinery. It said it had logged £10bn of orders since the end of June 2023. That puts the group on track for more than £30bn in sales orders this year.

War footing

Last month I wrote how I picked up shares in Qinetiq Group. That’s one of the UK’s fastest-growing defence companies. Now I see potentially more value in its biggest rival.

And we’ve heard how the company’s business pipeline is booming. BAE Systems strategy director Steve Cardew told the market in August that global conflicts had spiked sales. Especially with the Russian invasion of Ukraine.

In July 2023 it signed a £280m weapons deal with the UK government. In September it boosted that supply with another £130m contract.

Shortly after, the US, UK and Australian governments announced they would spend £3.95bn on a new generation of submarines built by BAE Systems. These nuclear-powered subs are to back up a pact to counter China’s ambitions in the South Pacific.

That has led to BAE upgrading its guidance. Earnings per share will jump 10% to 12% in 2023, said chief exec Charles Woodburn.

24 years of dividend hikes

BAE shares come with a 25% higher price tag than at the turn of 2023. Quite the move for a £32bn company. And certainly for one of the world’s largest defence, aerospace and weapons manufacturers.

The thing that really gets me interested here is long-term value. When seeking compound growth — the eighth wonder of the world — consistency is key.

And BAE Systems has an incredible track record. Since this would be a long-term income stock for my SIPP, I like one specific fact. The company has improved its dividend per share every year since 1999.

Ignoring BAE Systems because it has repriced higher? That’s effectively saying I wouldn’t buy a company that is becoming more popular, and growing its revenue, profits and dividends.

What I’d pay

The downside, of course, of all this attention, is that shares are now trading at 16 times earnings — a healthy premium. But I see safety in numbers. Especially with the way the world is leaning these days.

If I’d have bought £10,000 worth of BAE shares in 2007 (£4.29 a share, 2331 shares), I’d have collected a modest 12.8p per share in dividends, worth £298.

That same £10,000 invested in 2022 would be worth £452.26 in dividends! Quite the uplift.

This, of course, doesn’t include the gain I’d have had from simply buying the stock 16 years ago and reinvesting dividends. By my calculations, if I’d have done that, my initial £10,000 of BAE shares would now be worth a tidy £50,403.67. So I can see the power of compounding, and time in the market.

I’ll leave the intraday trades and risky leveraged punts to others. I’ll stick to Britain’s best businesses for my long-term SIPP retirement stocks.

The post The BAE Systems share price is up on £30bn sales spike. Is it my next SIPP star? appeared first on The Twelfth Magpie.

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Tom Rodgers has positions in QinetiQ Group Plc. The Motley Fool UK has recommended BAE Systems and QinetiQ Group Plc. 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.

However, stock market returns don’t always have to be this flashy. In fact, a mere 8% per year gain, with dividends reinvested, compounded over 30 years, can leave investors with a healthy figure. At 21 years old, this is a strategy I am currently employing to build wealth for later in life. Let’s take a closer look at three key ways I plan to do this.  

Compound interest and high dividends

So, where did I start? I currently invest a minimum of £200 per month into a Stocks and Shares ISA. I also invest in index funds, which mimic indexes like the FTSE 100 or S&P 500. Over the past 30 years, with dividends reinvested, these indexes have averaged returns of 7% and 10%, respectively. If I had started investing in the FTSE 100 with £1,000 to start and a £200 per month top-up 30 years ago – granted I wasn’t born yet – my investment would be worth over £250,000 today. Using the S&P 500’s healthier returns, I would have made over £470,000 from the same 30-year period of investing.

Another tactic I could use would be to focus on building a high-yielding dividend portfolio and reinvesting the cash generated. If my portfolio was generating 8% a year, with a 5% dividend reinvested, then my £1,000 would be worth over £920,000 when I was 50. Using this passive income hack is another way I can build a healthy retirement fund by benefitting from compounding.

Investing regularly

The key strategy here is to drip feed small amounts regularly. This investment style isn’t about generating big returns straight away, so there is no need to dump thousands into my portfolio at the start. This also helps to ease the pressure on my personal finances.

By investing small but consistent amounts, I also benefit from a phenomenon called dollar-cost averaging (or pound cost averaging in my case). Dollar-cost averaging works by investing fixed amounts consistently and benefitting from the overall upward trend of an asset, regardless of the price of each entry. This helps develop financial discipline as well as reduce the stress of investing.

Focussing on quality

The final way that I am looking to build a strong retirement fund is by making high-quality, long-term investment decisions. Whether this entails investing in index funds or choosing individual high dividend companies, I am going to take the long-term outlook. That is, investing in stable growth companies with a 30-year outlook, as opposed to high-growth stocks that could give me a quick return now.

Overall, by investing small amounts regularly, into index funds and high-quality dividend stocks, I think I can build myself a comfortable retirement fund over the next 30 years. There are always risks in investing in the stock market, but by taking this slow growth, consistent approach, I think I can make my money work in my favour for the future.  

The post Here’s how I’m using £200 a month to retire at 50 appeared first on The Twelfth Magpie.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. 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.

These days it can be difficult to find the money to invest for retirement. As inflation continues to squeeze budgets, it can be tempting to cut back on long-term savings plans. Short-term needs can seem far more compelling.

I get it, we’ve all been there at times, and for me it was especially true when I’d only just started working.

At the same time though, I also had plans to quit the rat race early to be able to travel more. With the average retirement age in the UK being just under 65 years old, I knew I’d have to start investing early to beat that.

Having now retired early in my 40s, these are the two top tips on investing for retirement that really helped make it happen.

Reinvesting dividends for a better retirement

It can be eye-opening to see the impact of reinvesting dividends on market returns. Especially as time goes on and those reinvested dividends start to earn their own returns — the so-called snowball compounding effect.

For example, the FTSE 100 average return is usually quoted as around 7.9%. What people often don’t mention is that includes reinvesting dividends. Without doing that, the average rate drops to around 5.8%.

The difference may sound small, but if I had invested a lump sum of £10,000 back in 1984, the impact today would look like this:

After 10 years, the gap is small at just under £4k. But by the start of 2022, it’s a far more substantial amount at around £95k extra. That’s pretty much twice the final pot size between the two different methods of investing!

That difference comes from the FTSE 100 average dividend level of around 3.5% over the same time period. So imagine how that gap widens when I target dividend shares above that rate.

That could be Rio Tinto, M&G and Persimmon — if invested equally between them, I’d get an average blended dividend rate of around 11.5%. That’s only going to widen that gap with this reinvestment approach.

That’s great — but where I saved my cash mattered too. Time for tip two!

Planning matters when investing for retirement

When it comes to investing for retirement, planning ahead matters.

I’ve always invested in pension schemes first for the tax rebates they offered. But it’s my ISA investments that offer me far more flexibility.

By using a Stocks and Shares ISA, I can invest up to £20k each year free of any capital gains. And now, I’m also able to withdraw a regular tax-free income to fund my early retirement.

If I’d bought those three shares mentioned above, then after just 10 years of maxing out my ISA I’d have about £350k in total, ignoring any capital growth. That would give me a healthy annual tax-free income of almost £40k!

Picking the right investments for retirement

I honestly couldn’t have retired early without using these two tips for investing for retirement. But it’s worth saying that (unsurprisingly) it’s as important to pick the right underlying investments.

Dividend yields are prone to change and inflation needs accounting for — especially these days. But taking the time to research what’s best for my personal risk/reward appetite really paid off.

It’s not always been easy, but these two tips were definitely a big part of helping me achieve my dream retirement.

The post 2 top ways to invest for retirement appeared first on The Twelfth Magpie.

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Michelle Freeman owns shares in Rio Tinto. 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.

The goal

To retire at 50, I need enough money to live comfortably for the rest of my life. I think £30,000 per year is plenty (at current prices). For that, I will need to take the pot of £10k I’ve worked hard to save and turn that into £1.5m in 25 years. It’s difficult, of course, but not impossible with the magic of compound growth where I add my returns to my pot and earn interest on my interest.

The S&P 500 has increased, on average, by 10.9% annually since 1970. At that rate, my £10k would double every 6.6 years and take over 50 to become £1.5m

I need returns of 20% or higher to meet my goal, and a high-risk investing strategy. I need potentially fantastic companies in my portfolio. How does Buffett find them?

Fundamentals and share price.

Buffett is a value investor and value investors take a different philosophical approach to investing. They always remember that they are buying part of a company, not just a derivative of its worth. This means Buffett only buys companies that he would personally want to own.

To work this out he looks at:

• a company’s cash flow
• Its debt
• Its revenue and management

If all of these are positive and the company is growing, I know I should have a good one.

Timing is everything

It’s not enough to have these fantastic companies. To reach that amazing 20% annual return, I need to hedge my bets and buy when their shares are ‘on sale’. Buffett himself likes to wait months, even years before buying a share. 

For example. Berkshire Hathaway (NYSE: BRK-B) is an amazing company by any measure.

It’s debt, while high, has only ever been a fraction of its cash flow which, since 2007, has been in the tens of billions. Berkshire Hathaway itself has, on average, increased in value by 20% a year since 1965. 

But the 2020 Covid crash temporarily knocked $50 off the value. The 2008 financial crash but it by 1/3rd. 

Sudden crashes in the share price make for the perfect time to build a position. Even after those crashes, Berkshire Hathaway was still an amazing company. 

Warren Buffett himself once advised that it was good to be fearful when others are greedy and greedy when others are fearful. If I wait for the perfect moment and conserve my capital, I can boost its growth potential by buying an amazing stock when other investors are holding back and it’s undervalued.

Conclusion

The best part of this investing strategy is that time is on my side. Because I’m looking for the perfect moments to invest in the perfect companies. I need to do is focus on my research and be patient.

This is a very risky strategy and I will need to be absolutely certain of my choice, as well as firm in my conviction. But this is how Warren Buffett made his fortune. I’m hoping that it will be how I make mine.

The post The Warren Buffett strategy I’m using to try to retire at 50 appeared first on The Twelfth Magpie.

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James Reynolds owns shares of Berkshire Hathaway (B shares). 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.

My retirement plan is two-pronged: first, I want to invest in a high-growth stock that I can buy now and watch the gains tick over. And I also want a safe dividend-payer that can provide passive income and security.

So as I ponder that future deckchair on a porch somewhere with an iced tea in hand, I’m thinking of JD Sports Fashion (LSE: JD) and GlaxoSmithKline (LSE: GSK). 

JD Sports Fashion

My “wildcard” bet is a bit riskier than the average retirement stock. Retail is undergoing a significant shift to e-commerce and competition is fierce. However, JD Sports’ share price has soared more than 75% in the past year, from 512p to 907p.

This kind of growth intrigues me, so I began digging into this FTSE 100 company’s financials. 2020 revenue rose just under 1% to £6.16bn, despite temporary store closures. Even with increased Covid-19 costs, it managed to score a pre-tax profit of £421.3m — down just 5% year-on-year. What excites me for the future is that 55% of the company’s total sales worldwide came from the US and mainland Europe in 2020. This shows a strong international presence that can be built upon. I think JD can become one of the top sports retailers on the planet, and has plenty of growth in it yet.

I still have some concerns though. While the risks of it are waning, I’m worried about the impact of a prolonged pandemic. Or worse, another pandemic in the future — I’m not planning on retiring any time soon, after all. An increase in direct-to-consumer sales from major brands could also hurt JD. With retail e-commerce accelerating rapidly, consumers may simply go straight to Nike or Adidas rather than shop at JD. Hopefully, there will be enough market share to go around though and JD did do every well in e-commerce in its latest year. 

GlaxoSmithKline 

Despite being one of the FTSE 100’s worst-performing shares over a year, GlaxoSmithKline is on my retirement watch list too. At its current price of 1,350p, this pharmaceutical giant is down more than 10% in the past 12 months. The FTSE 100 member is a dividend-paying stock, with a yield of 5.7%, which means passive income in my later years.

While GSK missed out on last year’s pharma rally, this was a one-off in my opinion. its dip was partly due to its regular vaccines business suffering during lockdown as people stayed away from doctors’ surgeries. The group’s turnaround is making progress. Sales of new pharmaceuticals rose by 12% to £2.5bn in Q3, accounting for 30% of all revenue. Glaxo also remained very profitable, with an operating margin of 22%. As the sixth-largest pharma company in the world, I believe GSK can remain at the top and provide my retirement with a passive income stream.

GSK is far from risk-free though, with many changes on the horizon. It plans to split in two in 2022 (the two ‘new’ businesses will focus on BioPharma and Consumer Healthcare), which may dent earnings. Its dividend is also set to fall for the first time in 15 years, which could hurt my retirement plans. This corporate restructuring could have mixed results and may lead to worse returns.

The post Why I’m buying these 2 FTSE 100 shares for retirement appeared first on The Twelfth Magpie.

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Jamie Adams 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.

I think everyone could benefit from listening to the main man. In fact, I’m a firm believer that anyone beginning their investing journey in their 40s could still retire early by adopting his methods. 

Terry Smith buys quality

Smith is a quality investor and focused on buying great companies. But what makes a company great?

You might think it’s all about rising profits. Smith, however, prefers to focus on a company’s Return on Capital Employed (ROCE). This is what it makes from the profits put back into the business to help it grow. The higher the percentage, the better. The average ROCE across Fundsmith’s portfolio is around 29% compared to the FTSE 100’s 16% or so.

Of course, Smith wants more than just a high ROCE. The cycling enthusiast seeks out companies that have “already won” and occupy a dominant position in their markets. 

He also looks beyond the London Market. As tempting as it is to ‘back what you know’, I think new investors should do the same. In addition to providing some protection from things like Brexit, opening your portfolio to high-growth overseas stocks can generate a far better return, as Fundsmith has shown.

Avoid high-income stocks

Terry Smith isn’t an advocate of income investing. Instead of distributing profits out to owners, he’s looking for companies that have a better use for the cash. 

This is an important point to grasp if, like me, you’re in your 40s. With many years left in my stock market journey, I’m reinvesting whatever I receive back into the market without exception.

Not spending what I receive ensures I’m taking advantage of compound interest as much as I possibly can.

Don’t obsess over prices

Most investors pay too much attention to valuations, according to Smith. The price you pay is important, of course, but it’s what the business does over time that really matters.

In a brilliant presentation, Fundsmith’s CEO explained how anyone paying as much as 32 times earnings for US drinks giant Pepsico and holding for years would still have beaten the return from the S&P 500 index.  

As a 40-something new investor, it might be tempting to buy nothing but screamingly cheap stocks in an effort to ‘catch up’. Some may even be tempted to throw everything they have at massively-hyped penny shares. Terry Smith’s performance over the years shows this level of risk-taking isn’t required.

Ignore the noise

Sure, Smith is successful because he’s a great stock-picker. However, he’s also successful because he cares little for what the global economy is doing at any particular time. This aversion to market timing means Fundsmith has incredibly low portfolio turnover. By minimising transaction costs, Smith therefore retains more of his profits. 

As someone in my 40s, I try to adopt a similar approach. Even when I do purchase shares, I normally take advantage of my broker’s regular investment plans. Buying on a fixed day in the month can actually reduce commission costs to zero! 

Save money where you can and retiring early need not be a pipe dream.

The post No savings at 40? I’d use the Terry Smith method to get rich and retire early appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Fundsmith Equity Fund. 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.

But don’t despair! Today, I’ll show how investing this exact amount every month into a Self-Invested Personal Pension (SIPP) can be the pathway to wealth, even millionaire status! Let’s start by revising a few facts about the SIPP. 

SIPP it to retire rich!

Anyone serious about growing their wealth for retirement should consider opening a SIPP. Like the Stocks and Shares ISA, this is a tax-efficient savings vehicle. It won’t involve paying capital gains tax on any profits made from the investments. There isn’t even any income tax payable on any dividends received from the stocks owned. Over time, this really matters.

There are a few other reasons for investing via a SIPP. Perhaps the most enticing of these is that any contributions made into the account qualifies for tax relief at a normal tax band. So, investors like me paying the basic rate (20%) will receive a 25% top-up from the government. In other words, £80 saved into an account becomes £100 after tax relief. 

Another positive is that I can save up to £40,000 in any one tax year. That’s double the ISA allowance!

£175.20 a month = retirement freedom

Back to the matter at hand. Let’s assume I’m saving the equivalent of the weekly State Pension (£175.20) into a SIPP every month. Thanks to the tax relief mentioned above, I would receive an extra £43.80 from the government, bringing the total monthly contributions to £219. Lovely!

Now, let’s assume I’m 40 years-old and I make these monthly instalments for the next 30 years. After all, there’s a possibility only those 70 and over might be able to access the State Pension by 2050. 

In 30 years, I will have saved a total of £78,840 according to my calculations. Let’s say this is invested this in the stock market and a penny wasn’t touched. I think I will be amazed by the results.

Wow! How much?

By 2050, that £78,840 will have grown to almost £175,000, assuming a 5% annualised return. As great as this sounds, the outcome could be even better if the chosen investments have performed well. 

A 10% annualised return would produce a little over £432,000 after 30 years. A 15% annualised return would make me a millionaire!

Of course, there are a few caveats. 

Keep costs low

Firstly, I must stress that there are no guarantees when it comes to returns. In reality, how much a person makes depends hugely on the age at which they begin investing and what they’re invested in. Small- and mid-cap companies tend to perform much better than big stocks over the long term, but they’re also far more volatile in the interim. 

Secondly, I’ve not taken account of any fees related to managing the SIPP, some of which will be unavoidable. Having said this, investors can keep costs low by not continually trading in and out of stocks. I’d just buy and hold.

In spite of these points, the numbers don’t lie. Look at how much money I could make by regularly saving into a tax-efficient account and trusting in the power of compounding!

I’d start investing the equivalent of the State Pension now and will be far less likely to be reliant on said State Pension in retirement.

The post Forget the State Pension. I’d drip-feed £175.20 a month into a SIPP to retire rich! appeared first on The Twelfth Magpie.

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• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
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Paul Summers 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.

One way of boosting a meagre State Pension would be to own shares in dividend-paying companies. These regularly return a percentage of their profits to their owners, allowing the latter to enjoy their golden years in a bit more comfort.

Unfortunately, not all such stocks are created equal. Today, I’ll highlight a few things that investors need to look out for. 

1. A very high yield

Big dividend stocks understandably appeal to those wanting to top-up the State Pension. The bigger the yield, the more money they’ll receive, right? Not necessarily.

A seriously-high yield — found by dividing the predicted total dividend by the share price and then multiplying by 100 — is usually a red flag. More often than not, it’s due to a fall in a company’s valuation. The yield is high because the dividend is now larger, at least relative to the share price. 

Generally speaking, it’s best to start asking questions of any company/share paying over, say, 5%. A lot more than this and it’s usually just a matter of time before management announces a cut.

The lesson here is clear — always look under the company’s bonnet first. Is trading poor? If so, are dividends likely to be paid while it turns itself around? If not, steer clear.

2. No growth

A lack of growth in the amount of cash returned to shareholders over the years is another potential red flag. After all, a rising dividend implies rising profits and confidence on the part of management; a stagnant dividend suggests a company is treading water. Even a long period of hikes is worth investigating further if these barely cover inflation and do little to supplement your State Pension.

This is not to say investors should panic if dividends don’t rise every year. Sometimes, a firm may simply want to invest spare money back into the business, perhaps to capitalise on a new growth opportunity.

A metric worth following over time is the extent to which a company’s dividend is covered by profits (otherwise known as ‘dividend cover’). Anything less than 1x cover for too long is a warning sign. Dividends covered twice by profits is ideal.  

3. Shaky finances

The coronavirus pandemic has served to remind investors that buying shares in highly indebted companies can be a risky strategy. This is particularly the case for those seeking to top up their State Pension via dividends. The latter are often the first thing to be sacrificed in troubled times as firms try to preserve cash.

Any debt-heavy company showering its shareholders with money should be avoided like the plague, in my opinion. The only exception might be if earnings are very predictable, such as those of a utility or pharmaceutical giant. Which brings me nicely to my final point for anyone looking to top-up a State Pension.

One final thing worth checking is just how cyclical a business is. Does it do well in times of economic prosperity and poorly in periods when people are tightening their belts? Clearly, any income from companies in this category is vulnerable, even if they look financially sound for now. Spread your money around or avoid them completely.

The post State Pension: if you’re buying shares to boost it, here’s what you need to know appeared first on The Twelfth Magpie.

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• 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?

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.

No savings at 50 isn’t an ideal situation. However, it’s also not the end of the world. Act quickly, and you could still build up a savings pot of £300k+ for retirement. This level of savings, combined with the State Pension, should enable you to live a comfortable, stress-free lifestyle in retirement. Interested to learn more? Here’s what you need to do.

Now’s the time to start saving

It goes without saying that if your goal is to retire with that sort of amount, it’s crucial to start saving immediately.

My advice here? Go back to basics. Draw up a budget. Cut down on expenses. Pay yourself first. And save all you can. Even if you can only save a little bit of money, get into the habit of saving regularly. This will put you on the path to financial security.

The right savings vehicle for retirement

Don’t just save into any old account though. Instead, take advantage of the amazing tax-efficient retirement saving vehicles that are on offer today.

A good example here is the Self-Invested Personal Pension (SIPP) account. With a SIPP, the government rewards you for saving for retirement. To save £1,000, you only need to contribute £800 if you’re a basic-rate taxpayer. The government adds in the extra £200 for you.

This is a fantastic deal. If your goal is to hit £300k+ in savings before you retire, a SIPP is definitely worth considering.

Investing: the key to building long-term wealth

The final step is to invest your retirement savings properly. Leave your money sitting in cash and it won’t grow much. In fact, it will actually lose purchasing power over time due to inflation.

Invest your savings in growth assets such as stocks and funds however, and your money should grow at a healthy rate over time. Over the long run, stocks tend to generate returns of about 7-10% per year. Pick the right stocks (The Motley Fool can help you here), and it’s possible to do even better than this. For example, had you invested in Rightmove shares a decade ago, your money would have grown at nearly 25% per year.

You’d be surprised at the level of savings you could build up in less than two decades if you invest your money wisely. Save £10,000 per year from age 50 (remember, you’d only need to contribute £8,000 per year into a SIPP to achieve this) and earn a return of 8.5% per year on your money through the stock market, and you’re looking at retirement savings of more than £350,000 by age 67. That’s the power of the stock market. Over time, stocks can transform small amounts of savings into huge sums.

Overall, there’s nothing complicated about this ‘no savings at 50’ retirement saving strategy. All you need to do is save regularly into the right type of accounts and invest your money.

If you’re looking for information on how to invest for retirement after 50, you’ve come to the right place.

The post No savings at 50 and worried about the State Pension? You could still retire with £300k+ appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Rightmove. The Motley Fool UK has recommended Rightmove. 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.

But which dividend stocks should you buy? For those wanting to stick with only the biggest UK companies, I think these FTSE 100 constituents are great candidates.

Become a dividend millionaire

FTSE 100 power provider National Grid (LSE: NG) doesn’t have the most electrifying reputation among investors. For those looking to build their wealth by allowing dividends to compound, however, this really isn’t the point. Dull is good. 

Analysts predict that the company will return 49.5p per share to investors in FY21. At the current share price, that gives a super yield of 5.3%. Now compare this to the paltry 1% interest you’re currently able to earn from the best Cash ISA available. Is it any wonder that many, including me, think holding too much cash is the biggest way of killing your retirement dreams?

Shares in National Grid currently change hands for almost 18 times earnings. That’s fairly high, at least relative to the firm’s average valuation over the last five years (13 times earnings). However, this premium is probably due to investors regarding the company as something of a safe haven in the current climate given the predictability of its earnings.

National Grid won’t make you a millionaire on its own. Held as part of a dividend-generating portfolio, however, it takes some beating.

Defensive demon

FTSE 100 defence behemoth BAE Systems (LSE: BA) might not to every investor’s taste. For those looking to become ISA millionaires by reinvesting their dividends, however, I think the firm is another excellent pick.

Having understandably paused its policy earlier in the year, the £16bn cap announced in July that it would kickstart dividend payouts again. This move, coupled with the firm’s belief that business will rebound in the second half of 2020 should be a comfort to those already invested.

The shares trade on just 10 times forecast FY21 earnings. That looks seriously good value to me, especially when you consider that the company, like National Grid, has a long history of consistently hiking its dividend.

Assuming it returns the 25p per share analysts predict in 2021, BAE yields just over 5%. The fact that the total dividend should be almost twice-covered by profits also helps to greatly reduce the possibility of a cut anytime soon.

Recovery play 

Packaging giant Mondi (LSE: MNDI) completes this trio of dependable dividend payers from the FTSE 100. 

Unlike the other two income stocks mentioned, analysts are forecasting a dip in the dividend next year to a little less than 59p per share. Even so, this still leaves the shares yielding 3.6% at their current price with the payout likely to be covered twice by profits. 

Mondi is due to release an update on trading on October 15. The decent recovery seen in the share price of late would suggest investors are optimistic about its outlook. Not that the performance over a short trading period should really concern would-be dividend millionaires. The message for them is simple: receive, reinvest, repeat. 

On just 13 times expected earnings for FY21, Mondi offers great value in my view.

The post 3 FTSE 100 dividend shares I think can help you become an ISA millionaire appeared first on The Twelfth Magpie.

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Paul Summers 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.