A good retirement portfolio should include some high-quality companies that pay consistent and growing dividends over time. Accordingly, I’ve been searching the FTSE 100 for the best stocks to buy for my Self-Invested Personal Pension (SIPP).
But which blue-chip shares could fit the bill right now? These are two retirement shares that City brokers are feeling very positive about. Here’s what they’re saying.
Ashtead Group
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Rental equipment supplier Ashtead Group has (LSE:AHT) suffered from lower demand in the media and emergency response markets more recently. Yet sales continue to grow strongly, and the business expects rental revenues to increase 11-13% this year, albeit at the lower end of this range.
Markets aren’t used to Ashtead scaling back its forecasts. March’s downgrade may not be the last time it trims expectations either, if US interest rates don’t come down.
But this wouldn’t discourage me from buying the company. From a long-term perspective, the outlook remains extremely bright, driven by its ongoing (and highly successful) acquisition-based growth strategy and significant structural opportunities.
Analyst Jarek Pominkiewicz of Quilter Cheviot notes that “we continue to see positive momentum in manufacturing and infrastructure megaproject-related activity, where Ashtead’s win-rate is more than double its overall market share”.
He adds: “This, coupled with the ongoing structural shift from owning equipment to renting, should pave the way for strong rental revenue growth over the medium term“.
Ashtead’s a true Dividend Aristocrat. It’s grown the shareholder payout every year for almost two decades, underpinned by impressive cash flows. And City analysts expect this proud record to continue until 2026, at least.
On the downside, its 1.5% forward dividend yield isn’t the biggest. But when it comes to dividend growth few FTSE stocks are better.
HSBC Holdings
Profits — and as a consequence, dividends — from banking stocks are highly sensitive to conditions in the broader economy. In the case of HSBC Holdings (LSE:HSBA), ongoing turbulence in its key Chinese marketplace casts a cloud over its near-term prospects.
Yet this hasn’t dampened my enthusiasm for the bank. This is thanks in part to its exceptional value for money. It trades on a forward price-to-earnings (P/E) multiple of 6.6 times and on top of this, the firm’s corresponding dividend yield sits at an enormous 9.5%.
Dividends are never, ever guaranteed, but HSBC’s strong financial position puts it in good shape to meet current dividend forecasts. Its CET1 ratio of 14.8% means it has one of the best balance sheets in the business.
I also like HSBC because of its focus on fast-growing markets of Asia. Financial services market penetration is soaring from current levels as wealth levels steadily improve.
And the bank’s reducing its global footprint to improve its focus on these regions. This week, it announced its exit from Argentina as part of its ongoing slimming-down programme.
City analysts are saying that HSBC shares could be poised to jump. The 18 analysts with ratings on the firm have slapped an average 12-month price target of 771p, up from 644p today. At current prices, I think it’s worth serious consideration from UK investors.
