3 Income-Paying Stocks for Your ISA

Whether you're rushing to top up your ISA or researching ideas for your new tax year ISA, we've got three attractive dividend payers for you

Holly Cook 31 March, 2015 | 2:15PM
Facebook Twitter LinkedIn

 

Holly Cook: With just a few days left before the end of the 2014-2015 tax year, we’ve got some income-paying stock ideas; whether you’re looking to top up your ISA before the end of the tax year, or you’re being very well prepared and getting ready for the 2015-2015 tax year, which starts next week.

So we’ve had a look for, specifically, income-paying stocks. But not just those that have a decent dividend yield right now; but those that have a sustainable competitive advantage over time, which is what our Morningstar analysts call an ‘economic moat’; and also those that are either fairly valued on the market right now or undervalued. So we don’t want anything that looks too expensive.

The first one that we’ve got for you is called BHP Billiton (BLT). Many people will know this as it’s the world’s largest publicly-traded mining conglomerate. This has got a narrow moat, according to Morningstar analysts, which means that it does have a sustainable competitive advantage but it’s not the widest advantage over others in the sector. It’s currently got 5 Stars, that means that compared to the analyst’s fair value estimate we think it’s really undervalued at the moment by the market. In fact, it’s the only stock in our UK coverage at the moment that has got 5 Stars. And the 12-month trailing dividend yield for BHP Billiton right now is 5.3% so that’s really considerably higher than inflation and of course higher than you’ll get in most interest rate-paying savings account.

The second one we’ve got for you is GlaxoSmithKline (GSK), one of the big pharma stocks. Morningstar analysts see this as having a wide economic moat, partly because of its substantial number of drug patents, its wide distribution network and also its diverse operations. So this currently has 3 Stars, meaning that given the price it’s trading at on the market right, now we think it’s fairly valued compared to how we would value the stock. It’s also got a 5.1% trailing 12-month dividend yield, so again a pretty substantial payment there.

Finally, the third one is British American Tobacco (BATS). It’s a tobacco-producer as you would guess from the name. We also think this has got a wide moat, so a really sustainable competitive advantage, and that’s partly because of its huge, broad range of tobacco products including even e-cigarettes. It’s also got 3 Stars, just like GlaxoSmithKline. So it’s fairly valued on the market at the moment, but just because it’s fairly valued doesn’t mean you’re not going to get a decent income in top if you invest in it. It’s currently paying 4.2%; that’s the 12-month trailing yield.

So there are three ISA stock idea for you, whether you’re investing in your ISA this tax year or next tax year.

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
British American Tobacco PLC2,307.00 GBX0.17Rating
GSK PLC1,643.50 GBX0.89Rating

About Author

Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures