Having an allowance of £15,000 to invest in shares and enjoying all the income and capital gains free of tax is pretty nice, but there’s only a little over three weeks to use up your 2014 allocation before the new one for 2015 kicks in. The good news is that it’s going up to £15,240, but what should you put in it? Here are three suggestions:
Unilever
Unilever (LSE: ULVR)(NYSE: UL.US) is one of those stocks that always seems to be a bit overpriced by traditional measures — at a price of 2,821p it’s on a P/E of 21 based on 2015 forecasts, while the FTSE 100‘s long-term average is about 14. But Unilever has been at that kind of valuation for years, and the reason is not hard to understand.
Unilever is expected to provide a dividend yield of a little over 3% this year, which is about the FTSE average — but it’s twice what you’d get from even the best cash ISA. The extent of the company’s worldwide business, coupled with the strength of its diverse portfolio of household brands, makes it a pretty reliable income, and investors are prepared to pay more for less uncertainty.
Standard Chartered
I reckon every ISA should have one decent bank in it, and I think Standard Chartered (LSE: STAN) is looking an attractive proposition now. The bank has had its problems, with poor performance in South Korea and declining confidence in its previous management, and that’s helped push the shares down 15% over 12 months to 985p.
But there’s been a board shakeup and there’s a new boss at the helm now, dividend yields are still forecast at 5%, and the shares are on P/E multiples of only 10.2 and 9 based on forecasts for this year and next with rises in earnings expected.
There are pressures on liquidity and there’s an outside chance of a dividend cut, and there might even be a rights issue, but the new management will be trying to keep shareholders as happy as possible.
Bovis Homes
Bovis Homes (LSE: BVS) is one of those rare beasts — a company whose shares have climbed but which are still on a very low fundamental valuation. The price is up 128% over the past five years to 945p, most of that in the past two, as the whole of the housebuilding sector has been resurgent.
But Bovis has actually been one of the slowest growers despite strongly rising earnings. And with EPS rises of 28% and then another 20% forecast for this year and next, we’re looking at P/E ratios of only 9.3 and 7.8, which seems almost criminally low compared to the index average. On top of that, the dividend has been recovering strongly with yields of 4.1% and 4.6% lined up.