We’re one day closer to 6 April and a juicy new ISA allowance of £15,240, so it’s time to think about what we could use it for — and how to use what’s left of the last one. One thing’s for sure, shares have wiped the floor with cash over the long term. Here are three that should help mix income with growth:
Diageo
Drinks giant Diageo (LSE: DGE) (NYSE: DEO.US) is one of those stocks that just keeps on beating the FTSE 100 year after year. In fact, since the start of 1990 it’s nearly six-bagged to 1,889p while the FTSE itself has managed only 175% — and Diageo only fell behind the index briefly when the dot com madness was upon us at the turn of the century.
With such reliability you might guess Diageo shares would command a relatively high P/E, and you’d be right — it’s an estimated 20 this year falling to 18 in 2016. But the well-covered dividend yields of around 3% are around twice the interest you’d get from a cash ISA.
National Grid
I’m not saying you should, but what would you get if you put your entire ISA allowance into National Grid (LSE: NG)(NYSE: NGG.US)? For one thing, if the forecast 5% dividend for this year comes good, you’ll have £770 in income alone, which is more than three times the dividend you’d get from the very best cash ISA. There is some risk the dividend might slow, but it’ll still surely be one of the best on the market.
The share price has a habit of beating the FTSE every year too, reaching 855p today. And with a P/E of a little over 14, which is about the FTSE average, I don’t see that stopping any time soon. So, a stock providing regular income with reasonable capital growth prospects too. Lovely.
Persimmon
Buy a housebuilder whose share price has already put on 275% over the past five years? You bet. I’m talking of Persimmon (LSE: PSN), on a current price of 1,741p. Although it has wiped the floor with the FTSE so far, I reckon there’s still plenty to come — especially as the shares are still on a forward P/E of only 11 for this year and just a bit over 10 next.
The thing is, although housing demand has been climbing, it’s set to outstrip supply for a long time to come — and that can only mean good news for the nation’s housebuilders.
Persimmon has been handing back lots of cash too, with its next special dividend of 95p per share set to be paid on 2 April, so you have time to grab it for this year’s ISA if you have some allowance left.