Two FTSE 100 dividend stocks I’d buy for my ISA with just £2k

If you have a few thousand pounds to invest, deciding which stocks deserve your hard-earned money can be a bit of a challenge. Even if you decide that you only want to invest in the FTSE 100, limiting your exposure to the UK’s top blue-chip stocks, picking out one or two top stocks from this basket isn’t easy. 

With this in mind, today I’m outlining the two FTSE 100 stocks that I’d buy for my ISA today if I had just £2,000 to invest. 

Cheers!

My first pick is Diageo (LSE: DGE). Warren Buffett once said that he’s willing to trade a “big payoff for a certain payoff,” indicating that he’s much more likely to invest in a company that will be around 10, 20 or even 50 years from now instead of an investment that might offer an attractive short-term return, but has an uncertain long-term outlook. 

I think Diageo falls into this bucket. One of the world’s largest alcoholic beverage companies, the group owns some of the most recognisable booze brands, such as Johnnie Walker and Guinness. I believe it’s highly likely these brands will still be producing a profit for Diageo and its investors long after I’m gone, which is why I think it’s the perfect starter ISA investment. You can buy and forget Diageo and not have to worry about the company’s day-to-day performance.

Right now shares in the firm are dealing at a forward P/E of 22.8, that’s a little above what I’d like to pay, but to quote Buffett again, “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” 

The stock also supports a dividend yield of 2.3%, and management has authorised the business to start buying back shares in recent years as an alternative way of returning capital to investors. 

Looking to the future

Another FTSE 100 stock that I reckon investors can buy for an ISA and forget is Legal & General (LSE: LGEN). This is one of the largest asset managers in the UK recently reporting more than £1trn of assets under management across its investment and pensions business. 

In my view, such a big business is virtually impossible to destabilise, and while Legal will always have to deal with short-term headwinds, over the long term, it should continue to expand. Indeed, as one of the world’s largest pension managers, it has to make sure people can trust that the business will be around when they retire. 

The good news is, the firm is doing just that. It recently reported a 14% increase in operating profit to £2.3bn, boosted by mortality-related reserve releases. Without these reserve releases, operating profits jumped 10%. 

City analysts are expecting further growth in 2019, they’ve pencilled in earnings growth of 7.7% for the year, leaving the shares trading at a forward P/E of 8.4. On top of this, the stock also yields a highly attractive 6.6%. 

So, if you’re looking for a cheap, high-yielding stock you can buy and forget for your ISA, I highly recommend taking a closer look at Legal & General as well as Diageo.