The long game: how to identify retirement-ready SIPP stocks

For UK investors, a Self-Invested Personal Pension (SIPP) is quickly becoming the go-to choice for retirement. More and more Brits are opting for the greater control, flexibility, and improved investment choices it provides.

But when considering a SIPP, it’s critical to identify the right stocks from day one. In most cases, this means the boring — but reliable — options.

Here’s one example that perfectly demonstrates this strategy.

Planning in decades, not years

Think about the brands you see every day in high street stores — Dettol, Nurofen, Durex, Gaviscon. That’s Reckitt Benckiser (LSE: RKT). Some people may not even know the company name, but they definitely know its brands.

As a consumer goods manufacturer, it sells health, hygiene and home‑care products all over the world. A lot of what it sells is everyday ‘must‑have’ stuff: cleaning sprays, painkillers, cold and flu remedies and baby formula. People buy these items in good times and bad, making sales steadier than luxury fashion, car makers or similar cyclical industries.

In 2024, the company’s like‑for‑like sales grew by 1.4%, while adjusted operating profit grew by 8.6%. Meanwhile, profit margins remained above average, at around 24.5%. That tells you two things: it managed to grow in a tricky year, and is good at turning sales into profit.

Why Reckitt can work well in a SIPP

People still need painkillers and cleaning products even in a recession, smoothing out volatility compared with riskier shares. And strong brand power makes it easier to charge higher prices, even when costs go up. Plus, it sells globally, spreading the risk if one market has a wobble.

The dividend yield has mostly sat around 3-4% in recent years, supported by a record of paying and gently growing dividends over time. Inside a SIPP, those dividends can be reinvested without tax, helping your pot grow faster.

With both return on equity (ROE) and return on invested capital (ROCE) in the mid‑teens, it’s clearly a company that knows how to turn money into profit. That’s what you want from a core, long‑term holding in a SIPP.

The downsides and risks

Reckitt’s higher-than-average P/E adds a risk of disappointment if growth slows. Unlike a value stock with more immediate recovery potential, this is a high-priced but established slow-growth stock. But in a cost‑of‑living squeeze, some shoppers swap branded products for supermarket own‑label, hurting profits.

Furthermore, it carries a fair bit of debt, with a debt‑to‑equity ratio around 1.5. When used effectively, debt can be beneficial — but if profits slip, it can become problematic.

So, is it worth a look for a SIPP?

If you’re building a SIPP for the long haul, Reckitt is the kind of share that can sit quietly in the background, doing its job while you get on with life. It sells products people actually use every day, it’s still growing profits, it pays a reasonable dividend, and it has the sort of resilience that can help you sleep at night.

For those reasons, I think it’s a name worth considering for a UK retirement portfolio.

But it shouldn’t be considered alone – ideally, a retirement portfolio should include a mix of stocks from other sectors and geographical regions. Other top options to consider include Unilever or National Grid — similarly defensive, sustainable (but boring) stocks.

The post The long game: how to identify retirement-ready SIPP stocks appeared first on The Motley Fool UK.

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Mark Hartley has positions in National Grid Plc, Reckitt Benckiser Group Plc, and Unilever. The Motley Fool UK has recommended National Grid Plc, Reckitt Benckiser Group Plc, and Unilever. 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.

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