April brings our new 2015 ISA allowances, with a modest rise from last year’s £15,000 to £15,240. At the moment, the very best cash ISAs around would earn you about £240 in interest, and you should easily be able to beat that with shares. Here are three for you to consider:
Lloyds
Lloyds Banking Group (LSE: LLOY)(NYSE: LYG.US) recently announced its return to paying dividends — a yield of less than 1% for 2014, but the occasion was momentous nonetheless. Forecasts suggest a decent yield of 3.6% for this year, followed by 5.2% in 2016, and that’s serious cash again.
In fact, a yield of 5.2% extended to your entire ISA allowance would provide £792 in dividend cash alone — more than three times the interest on a cash ISA.
With profits back and liquidity ratios strengthening, Lloyds shares are on a forward P/E of only 10, dropping a little for 2016. That’s significantly cheaper than bailed-out rival Royal Bank of Scotland, which is at least a year behind in resuming dividend payments. Lloyds looks like a bargain to me.
AstraZeneca
If you want to see a terrific turnaround, look no further than what CEO Pascal Soriot has achieved at AstraZeneca (LSE: AZN)(NYSE: AZN.US). The FTSE 100 pharmaceutical company was struggling with loss of patent protection, a weak development pipeline, and plunging profits just a few short years ago.
Yet by refocusing on the company’s key strengths, offloading non-core businesses, and reinvesting in research and development, Mr Soriot has returned AstraZeneca’s pipeline to one of the best in the business, and we’re expecting a return to earnings growth by 2017 at the latest.
And while we’re waiting for that, there’s a 4.1% dividend yield on the cards, and it should be covered well enough to be safe.
Barratt
Does it make sense to buy a housebuilder that’s already climbed 17% in the past year and has more than quadrupled over five years? It’s Barratt Developments (LSE: BDEV), and I reckon it does.
For the year to June 2015, the City is expecting another 38% EPS rise from Barratt, followed by 18% in 2016. That’s slower than the meteoric earnings growth of recent years, but it would still leave the shares on a 2016 P/E of only around 10 — that really does show just how undervalued the housebuilding sector was at the depths of the recession.
Longer term growth seems pretty much assured too, as the UK’s housing shortage continues to bite and political parties are vying to make the best promises of boosting building. There were no dividends during the slump, but Barratt is on for a 4.4% yield this year followed by 5.4% next, and that looks very attractive to me.