2 FTSE 100 dividend shares I plan to hold well beyond retirement!

Mature friends at a dinner party

The FTSE 100 has historically proven to be an excellent place for investors to find top dividend shares. The UK’s leading share index is packed with great companies that have strong cash flows and, as a consequence, the means to pay large and growing dividends.

Here are two brilliant income shares I own in my Stocks and Shares ISA. Let me explain why I plan to hold onto them for the long haul.

Rio Tinto

Earnings at commodity stocks can fluctuate wildly from year to year. When economic conditions harden and raw materials demand falls, profits at companies like Rio Tinto (LSE:RIO) can fall sharply.

But over the long term, blue-chip shares in this sector have still proved to be exceptional wealth builders. The consequences of population growth — including rising demand for essential goods, housing and infrastructure — plays into the hands of metal producers such as this FTSE 100 giant.

Investing in larger operators has significant advantages to investors. Their exposure to multiple commodity classes reduces risk as weakness in one area doesn’t derail earnings at group level. Rio Tinto is a major supplier of iron ore, copper and aluminium, for instance, and is a growing force in lithium.

Copyright © 2023 Rio Tinto

Large-scale miners like this also have significant balance sheet strength they can use to pursue growth opportunities (such as acquisitions) and to pay big dividends. Incidentally, Rio Tinto’s forward dividend yield currently sits at 7.1%, far above the Footsie average of 3.9%.

Today, the company’s net-debt-to-underlying EBITDA ratio sits at a tiny 0.4 times. This gives it huge scope to continue rewarding investors with dividends and invest in the business.

Bunzl

Support services business Bunzl (LSE:BNZL) doesn’t offer the sort of mighty forward yields as Rio Tinto. For 2024, the company’s yield sits back at 2.2%.

But this doesn’t mean it isn’t an exceptional dividend share in its own right. Until the pandemic struck in 2020, the firm had grown annual dividends every year for almost three decades. And with the public health emergency over, shareholder payouts are rising strongly again.

Bunzl’s brilliant record of dividend growth is built on its hugely successful acquisition-based growth strategy. The programme has boosted group earnings by expanding its geographic footprint, opening opportunities in new sectors, and cementing its place in existing ones.

As analysts at Hargreaves Lansdown note: “Around two thirds of the revenue growth over the last 10 years has been a result of adding new businesses to the portfolio“.

The good news is that Bunzl’s cash generation remains as impressive as ever. And this gives the company the firepower to continue making acquisitions and keep growing dividends. Its net-debt-to-EBITDA ratio came in at just 1.1 times as of June 2023.

Bunzl isn’t immune to earnings turbulence from time to time. Profits can slip, for example, on account of rising costs or supply chain issues.

But its focus on supplying essential products (think food packaging, for instance) gives the company better stability than more cyclical UK shares. And this in turn also helps it grow dividends year after year.

Should you invest £1,000 in Bunzl Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Bunzl Plc made the list?

See the 6 stocks

More reading

Royston Wild has positions in Bunzl Plc and Rio Tinto Group. The Motley Fool UK has recommended Bunzl Plc and Hargreaves Lansdown 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.