Dividends are back! Here are 3 FTSE 100 income stocks that I would buy for retirement


After being cut across the board in March, dividends are back. The news will rejoice the hearts of UK income hunters.Today I watch a trio of FTSE 100 stocks that have informed the market of their intention to return liquidity to their owners. Thanks to their size and overall resilience, I think all of them are worth considering by those with one or both eyes on retirement.

Back on track

Paper and packaging unit FTSE 100 Worlds (LSE: MNDI) is the first.

After withdrawing its final dividend of 55.72 euro cents per share in April, the £ 7 billion cap said earlier this month that it would now pay holders 29.75 euro cents for 2019.

It’s getting better. In addition to this payment, the company also announced a 2020 interim dividend of 19 euro cents per share. This despite profit before tax in the six months to the end of June down 26% to 466 million euros.

On just under 14 times the estimated earnings for FY20, Mondi looks cheap in my book. The share price is still 35% below its peak in 2018, despite rising free cash flow and still decent margins and returns on invested capital.

Take into account the likely future growth in demand for sustainable packaging and I think this would be a great addition to any retirement-focused portfolio.

Defensive dividends

BAE systems (LSE: BA) was my first choice for July. Since then, the shares have risen 9% in value. As nice as it may be, the potential for capital gains has not been my primary motivation for showcasing the stock. Rather, it was BAE’s defensive qualities combined with the likelihood that the FTSE 100 giant would confirm it would restore its dividend. The latter has now arrived.

At the end of July, BAE management confirmed that a cash return of 13.8 pence per share, once offered and then deferred, would now be paid to holders in September. In addition, an interim dividend of 9.4 pence per share would be distributed in November to cover the first six months of 2020.

According to CEO Charles Woodburn, BAE expects “a good second semester all year round“. That is, of course, as long as we don’t get a significant second wave of the coronavirus. As it stands, the group’s sales are expected to increase by “A low single digit percentage compared to last year.”

Despite the subsequent rise in the share price, BAE still looks good to me. The shares are trading 12 times the expected earnings for FY20.

Long live aviva

A third FTSE 100 share that has started paying dividends again is an insurance company Aviva (LSE: AV). In April, the company withdrew its dividend policy following directives from the Bank of England.

This month, however, a second interim dividend of 6 pence per share was declared by management. Like Mondi, this despite a sharp drop in pre-tax profit in the first half of 2020 (down 29% to just under £ 1.1bn).

At 6 times expected profit, Aviva appears priced for the apocalypse. However, potential holders should be aware that the company is still considering reviewing its longer term dividend policy.

In practice, this will mean a decrease but, above all, durable payment. The remaining cash will repay the debt. Considering that the latter is on par with the value of the whole company, that seems to me to be quite rational.

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Paul Summers does not have a position in any of the stocks mentioned. The Motley Fool UK does not have a position in any of the stocks mentioned. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations that we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a diverse range of information makes us better investors.


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