Why Your ISA Should Benefit From Holding National Grid plc, Royal Mail PLC And Drax Group Plc

These 3 stocks could boost your ISA returns: National Grid plc (LON: NG), Royal Mail PLC (LON: RMG) and Drax Group Plc (LON: DRX)

| 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.

sdf

National Grid

While National Grid’s (LSE: NG) (NYSE: NGG.US) headline yield of 5% may be enough to attract many investors towards buying the stock, the company’s future dividend growth rate could prove to be even more important over the long run. That’s because, while inflation has fallen to zero in February, in the long run it is highly unlikely that it will remain so low. As such, National Grid’s goal of increasing dividends by at least as much as inflation could, in time, prove to be a highly attractive asset to have and allow investors in the company to enjoy a real terms increase in their income over a sustained period.

In addition, National Grid offers vast stability and a consistency that is difficult to match in the FTSE 100. Therefore, while the next few months could prove to be turbulent for the wider index, National Grid should offer relative stability, as well as a bright long term future in terms of increasing investor demand pushing its share price higher.

Royal Mail

Although Royal Mail (LSE: RMG) (NASDAQOTH: ROYMF.US) is facing considerable potential within the parcel delivery space, it continues to offer excellent value, growth and income potential. For example, it is forecast to increase its bottom line by 13% in the next financial year. This is an impressive rate of growth – especially since Royal Mail trades on a lower price to earnings (P/E) ratio than the FTSE 100, with it having a P/E ratio of 14.8 versus 16 for the wider index.

In addition, Royal Mail’s share price fall over the last year (its shares are down by 23%) now means that it offers an even better yield. In fact, it now yields a very impressive 4.7% and, with dividends being covered 1.5 times by profit, its shareholder payouts appear to be very sustainable.

Drax

It’s been a challenging few years for Drax (LSE: DRX), with the power station seeing its earnings fall by 63% since 2010. As such, the company’s share price has fallen considerably and, in the last year for example, it is down by 48%.

However, Drax’s future could be much improved, with it being forecast to increase its bottom line by 25% next year. And, with it having a P/E ratio of 21.9, this equates to a PEG ratio of just 0.8, which indicates that its shares are undervalued at the present time. Furthermore, with Drax having a forward dividend yield of 3.2%, it remains a relatively appealing income play that could see its shareholder payouts increase rapidly over the medium term. Therefore, despite a troubled recent past, Drax could be a sound long term buy for your ISA.


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.

Peter Stephens owns shares of National Grid. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Portrait of pensive bearded senior looking on screen of laptop sitting at table with coffee cup.
Investing Articles

7.5x earnings, £80.2m in net cash, and a big yield… what’s not to like about this UK stock?

This UK stock has a really strong net cash position relative to its size and its other metrics are very…

Read more »

Two male friends are out in Tynemouth, North East UK. They are walking on a sidewalk and pushing their baby sons in strollers. They are wearing warm clothing.
Investing For Beginners

My daughter could earn a £75,000 second income because we started an ISA at birth

Earning a second income is a dream for many Britons. By leveraging time, investors could make it a reality for…

Read more »

Portrait of a boy with the map of the world painted on his face.
Investing Articles

Could this trigger a stock market crash?

Dr James Fox takes a closer look at an alarming trend in the Far East that could have consequences for…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

What’s happening with the Jet2 share price?

The Jet2 share price has lost momentum after the tour operator said that customers were leaving their bookings to the…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

Could the Chancellor’s Leeds Reforms trigger a bull market for UK stocks?

More competitive lending and greater interest in shares could help kick start growth for UK businesses. But could it also…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

I think this AI stock could double before Palantir

Palantir stock is up almost 100% this year. As a result, it now sports a market cap of $350bn meaning…

Read more »

Elevated view over city of London skyline
Investing Articles

As the FTSE 100 hits an all-time high, is it time to reconsider the S&P 500?

Christopher Ruane explains why a surging FTSE 100 has not yet made him focus more on the potential of S&P…

Read more »

GSK scientist holding lab syringe
Investing Articles

The FTSE 100 sits at a record high. But some stocks still look dirt cheap!

The usually sluggish FTSE 100 is having a surprisingly good year. But our writer feels there are still potential bargains…

Read more »