Warning! Could these FTSE 100 dividend stocks destroy your retirement plans?

Royston Wild explains why these FTSE 100 (INDEXFTSE: UKX) dividend stocks could leave you much, much poorer.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Times are tough for the FTSE 100’s Big Tobacco players Imperial Brands (LSE: IMB) and British American Tobacco (LSE: BATS).

Unless you’ve been living in a cave for the past several years, you’ll know how the steady legislative creep on the sale, marketing and usage of their traditional combustible goods across the globe has had a devastating impact upon sales in that time.

It’s a trend which has seen the share prices of the aforementioned companies slump an incredible 50% and 38%, respectively, over the past three years alone.

I know there’s plenty out there cursing the mindset of recent sellers and what they deem to be chronic short-termism. Sure, sales of their tobacco products might be on the slide but the vast investment they’re making in e-cigarettes and other vaping technologies should still pave the way to rich returns, right?

Playing with fire?

Well it’s possible but, in my opinion, anyone banking on these next-generation products to drive sales like cigarettes used to is playing with fire. I’ve touched upon the increasing legislative attack on the likes of Imperial Brands’ Blu, and British American’s Vype e-cigs, time and time again. And in recent weeks, newsflow surrounding the issue has got even worse.

In what could prove a game-changing moment for the industry, the Illinois Public Health Department last month claimed a patient who died of severe lung disease in the state did so as a direct result of using vaping products. Legislators have since called in the Centers for Disease Control and Prevention (CDCP) to investigate some 36 cases where respiratory illness is said to be related to the use of e-cigarettes and similar technologies.

In total, there are almost 200 such cases being investigated across the US, the CDCP says and, as a result, the heat is well and truly being turned up on Big Tobacco’s operations in North America. Lawmakers in Los Angeles County, to cite just one example, are thinking of following the ban on public vaping introduced several years ago by introducing restrictions on the sale of flavoured tobacco for e-cigs.

But things aren’t only getting tougher in the US as legislators in critical emerging markets also pile in against the vaping segment. Indeed, news has emerged in the last fortnight that the Indian government is mulling steps to ban the production and importing of e-cigarettes to prevent an “epidemic” developing among young people in the country.

Up in smoke

And in the meantime, the legislative attack on Imperial Brands and British American’s traditional products continues to grow too. August also saw the latest ban on indoor smoking in public spaces introduced in Montenegro, one of Europe’s biggest cigarette markets where an estimated third of the population are regular smokers.

Big Tobacco was always considered one of those ‘sure bets’ for investors, the addictive nature of their products providing the bedrock for solid earnings and dividend growth year after year. But the party seems to be well and truly over and I fully expect the likes of British American and Imperial Brands to keep on sinking.

So ignore their juicy forward dividend yields of 7% and 10%, I say, and build your retirement strategy with other UK-listed income stocks.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. 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.

More on Retirement Articles

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

Worried about tax raids? Here’s how I’m targeting a £44,526 passive income with shares

Investing in a Self-Invested Personal Pension (SIPP) or Individual Savings Account (ISA) can supercharge one's passive income, says Royston Wild.

Read more »

Investing Articles

How I’d invest within a SIPP to target a 7% dividend yield

Zaven Boyrazian explains the steps he’d take to target a high-yield, income-generating SIPP for 2024 and beyond by investing in…

Read more »

Investing Articles

No pension at 50? Here’s my SIPP investment plan to target £16k a year in passive income!

With disciplined saving, a solid investment plan and the tax benefits of a SIPP, it’s possible to turbocharge pension growth…

Read more »

Young woman holding up three fingers
Investing Articles

These 3 investing steps could make me an £11,680 passive income!

If I was starting out on my investing journey, here's how I'd try to build a robust passive income with…

Read more »

The words "what's your plan for retirement" written on chalkboard on pavement somewhere in London
Investing Articles

Small SIPP at 55? I’d take these steps to boost my retirement savings

With a consistent savings plan, sound strategy, and some wonderful tax relief in a SIPP, it’s possible to massively grow…

Read more »

Investing Articles

Value, growth and dividends! 3 ETFs I’d buy in a Stocks and Shares ISA

Royston Wild believes these UK-listed exchange-traded funds (ETFs) could help him create a winning Stocks and Shares ISA.

Read more »

Investing Articles

How I’d pick dividend stocks to retire with a second income using my £20k ISA allowance

Our writer details his strategy to build a second income stream before retirement by investing in dividend stocks with the…

Read more »

A senior group of friends enjoying rowing on the River Derwent
Investing Articles

How I’d invest £100,000 in a SIPP to build long-term retirement wealth

There are multiple ways to build wealth in a SIPP. Zaven Boyrazian explores different methods to help identify which is…

Read more »