5 Great ISA Picks

Here’s why Aviva plc (LON: AV) and Barclays PLC (LON: BARC) should be in your new ISA.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

There are only a few days left to use of the last of your old ISA allowance, so you’d better get moving if you don’t want to waste it.

And if it’s already used, you’ll have a whole new allowance (which will rise to £15,000 in July) for 2014-15, so which companies should you consider? Well, for me, the best use of an ISA is for stashing away investments for the very long term — until retirement, for example.

So here are five that I think should stand the test of time, showing some basic measures together with historic 10-year price appreciation:

Company Price P/E Divi 10-year
Aviva 490p 10.1 3.5% -16%
Barclays 246p 8.7 4.0% -48%
National Grid
822p 15.7 5.1% +77%
Rio Tinto 3,336p 9.9 3.7% +190%
Royal Dutch Shell 2,334p 11.2 4.9% +83%

P/E and Dividend yields are forecasts for next year-end.

Aviva

AvivaInsurance really is a long-term business, and though it can be erratic over the short term, it has a habit of coming out ahead over the decades. Aviva (LSE: AV) had to slash its dividend in 2012 — it had paid an overstretched 8.6% the previous year. But even after that, a forecast yield of 3.5% is better than average, and Aviva’s future growth prospects are looking good.

The share price is down over 10 years, but that did include the credit crunch and recession, and there were good dividends to compensate. With a forward P/E of 10.1 (dropping to 9.3 for 2015), the shares look oversold and a good long-term bet.

Barclays

barclaysBarclays (LSE: BARC) has been through the wars, and is today looking the least risky of the five FTSE 100 banks — and the sector is surely emerging into a new light after the dark years. Barclays’ liquidity ratios are looking strong now, good dividends are expected (4% this year, 5.6% next), and with a forward P/E of under 9 the shares are just too cheap.

And Barclays doesn’t have the same risky exposure to an overheating China that is worrying shareholders of HSBC and Standard Chartered now.

National Grid

The utilities companies pay some of the steadiest dividends in the market, and as the provider of distribution infrastructure in the UK, National Grid (LSE: NG) is at lower pricing risk than some in the government’s eye — in fact, while some utilities share prices have fallen over the past 12 months, National Grid is up 5%.

Those 5% dividend yields look very attractive to me.

Rio Tinto

rio tintoRio Tinto (LSE: RIO) is in a depressed sector, but one which is recovering — in fact, Rio set new production records for iron ore, bauxite and thermal coal in 2013, despite the alleged slowdown in demand from China (which is still growing its economy at 7.5% per year). Over the long term, Rio Tinto’s earthly delights will be in great demand, of that there is really no doubt. And if you can get in when the sector is in a cyclical downswing (a P/E of under 10 is a steal), so much the better.

Royal Dutch Shell

You just have to have an oil & gas supplier, don’t you? Over the next 20-30 years, demand is going to be very strong and the profits will be handsome. Why Royal Dutch Shell (LSE: RDSB)? To be honest, I think either Shell or BP would be just fine, but BP still has a bit more recovery needed before it gets back to earnings growth — though over 20 years, well, take your pick.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan does not own any shares mentioned in this article.

More on Investing Articles

Investing Articles

9.4%+ yields! 3 proven FTSE 100 dividend payers I’d buy for my Stocks and Shares ISA

Our writer highlights a trio of FTSE 100 shares with yields close to 10%. He'd happily pop them into his…

Read more »

Mixed-race female couple enjoying themselves on a walk
Investing Articles

Are Raspberry Pi shares a once-in-a-lifetime chance to get rich?

With Raspberry Pi shares surging after a successful IPO, could this UK tech startup offer a long-term wealth creation opportunity…

Read more »

Newspaper and direction sign with investment options
Investing Articles

Huge gains and 9% yields: why now’s an amazing time to be a stock market investor

The stock market’s generating fantastic returns in 2024. Whether you're looking for gains or income, it’s a great time to…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

This steady dividend payer looks like one of the best bargain stocks in the FTSE 100

A yield of 4.7% and a consistent dividend record make this FTSE 100 company look like good value in an…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

£9,000 in savings? That could become passive income of £19,175 a year

It's possible to invest affordable sums of money into building a big passive income stream. Here's how I'd go about…

Read more »

Black father and two young daughters dancing at home
Investing Articles

Legal & General shares: a once-in-a-decade passive income opportunity?

Is a dividend yield at its highest level in a decade, combined with a strong record of increasing payouts, a…

Read more »

Investing Articles

With a 7% yield and 4.1 P/E, is this the best passive income stock on the FTSE 350?

Millions of Britons invest for a passive income. While our writer isn't buying this stock yet, he believes it's worth…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

This amazing FTSE 250 has a 8.8% dividend yield and trades at just 4x forward earnings!

Our Foolish writer believes this FTSE 250 stock is worth keeping a very close eye on. However, he's not keen…

Read more »