If the FTSE 100‘s recent surge through the 7,000 barrier has left you unsure of where to find attractively valued stocks for your ISA, then I have a few suggestions.
I’ve found three stocks I believe offer an attractive mixture of income and growth potential, making them ideal ISA buys.
Amec Foster Wheeler
Amec Foster Wheeler (LSE: AMFW) released its 2014 results this morning, revealing a solid set of numbers, in line with expectations.
Adjusted earnings per share fell by 9% to 79.5p, but shareholders were reassured by a 3% increase in the dividend, which rose to 43.3p, giving a respectable, well-covered yield of 4.4%.
Amec did warn that profit margins are likely to come under renewed pressure in 2015, as the firm’s customers implement spending cuts across the board and demand lower prices. However, on a forecast P/E of 11, I think Amec remains reasonably priced to deliver an attractive mixture of income and capital gains when the oil market recovers.
Supergroup
Supergroup (LSE: SGP) issued a strategic update this morning, sending the fashion firm’s share price up by 10% to a high of 1,024p in early trading.
Euan Sutherland, Supergroup’s chief executive, said that the firm will begin paying a dividend in the 2016 financial year, which starts on 27 April. Target dividend cover will be between 3.0 and 3.5 times earnings, which my calculations suggest could imply a 2015/16 payout of 15-20p.
To drive long-term growth, Supergroup is going to buy back the exclusive licence to distribute Superdry products in North American. Alongside this, the firm will launch a new, premium range backed by US actor Idris Elba, aimed at moving Superdry upmarket and appealing to US customers.
Centrica
Centrica (LSE: CNA) may seem dull alongside Supergroup, but the British Gas owner has a number of attractive qualities for investors looking to shelter their dividend income inside an ISA.
The utility’s new chief executive, Iain Conn, recently marked his arrival with a grim set of final results and a 30% dividend cut. Although shareholders may not have cheered the decision, this should put Centrica on a more solid financial footing for growth as energy prices recover.
Centrica currently offers a prospective yield of 4.8% and trades on a forecast P/E of about 14. In my view, now could be a good time to buy for a reliable long-term income.
The best ISA pick?
I believe all three of these stocks could deliver steady growth plus some income, but if you’re looking for a stock with the potential to really deliver fireworks, then you may need to look elsewhere.