When it comes to using up our annual ISA allowance, where should we allocate the £15,240 we’ll be able to invest tax-free from 6 April? It can pay to have a diversified portfolio, so here are three candidates from three different sectors:
Morrison
The big uncertainty about Wm Morrison (LSE: MRW) was always going to be the size of its dividend cut — even when the old board insisted they had no plans for it, the smart money knew it had to happen. Morrison has always been slow at the heels of Tesco and Asda, and was once again trying to follow them into convenience stores when the big players had moved on to the next strategy of cost-cutting and price-warring. Incoming boss David Potts has seen this and the company is to slow down its rollout “significantly“.
Meanwhile, new forecasts suggest a dividend yield of 3.9%, although it would be covered only 1.5 times by forecast earnings and some will fear further cuts in the ongoing battle with Aldi and Lidl. But with the 203p shares now on a P/E of under 14 on 2017 estimates, and with the worst of the uncertainty out of the way, it has to be an ISA possibility now.
Antofagasta
The case for copper miner Antofagasta (LSE: ANTO) is really quite simple — the mining sector is oversold and mining stocks are looking cheap for the long term. Low metal and mineral prices have hurt the sector badly in recent years, but they can’t last forever and miners in good shape should benefit nicely when an upturn comes.
Antofagasta has been seeing steady production — copper output for the full year was down 2.3% due to lower grades, but Q4 saw a 10.8% rise on the same period a year previously. And with EPS forecasts for the next two years dropping the P/E to a little over 11 by 2016, I see a lean and fit long-term bargain here.
Taylor Wimpey
With housebuilder Taylor Wimpey (LSE: TW) I’m seeing a sector that was grossly undervalued during the recession, but which has yet to get back to its full potential. Full-year results were positively glowing, with home completions up 6.5% and an average selling price up 11.5%. The firm is still oozing cash, with a further 7.68p per share to be handed back to shareholders in July, and yields are forecast at 6.1% and 6.6% for the next two years.
And even though the share price has more than six-bagged to 149p since 2010’s low point, we’re still looking at a forward P/E of only a little above 10 this year, dropping to 9 for 2016.