I’d max out my annual ISA allowance with these small-cap dividend stocks

Royston Wild picks out two terrific income shares to consider loading into a stocks and shares ISA right now.

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In a recent article, I scoured the FTSE 100 and dug out a couple of great dividend stocks I’d buy if I had cash to spare before the ISA window for the 2018/19 tax year slams shut.

But why restrict my search to London’s biggest blue-chips? Here are two brilliant small-caps to consider stocking up on before that upcoming investor deadline.

Hit the bricks

Given the size of the country’s homes shortage, it’s likely that Forterra (LSE: FORT) will remain a mighty dividend payer for many years to come.

It’s important not to underestimate the extent to which Britain’s builders need to charge up build rates to meet soaring demand and, as one of the country’s foremost brickmakers, Forterra is well placed to capitalise on this requirement.

Latest stats from the Ministry of Housing, Communities and Local Government illustrated the scale of the supply/demand imbalance in the UK homes market and the work by the housebuilding sector to soothe it. Apparently, there were some 44,740 newbuild residential starts (seasonally adjusted) between October and December, up 12% from the previous three-month period, a figure that reflected the strength of the market even in unpredictable political and economic times such as these.

Big dividends, top value

Fresh commentary from the Brick Development Association confirmed the strength of current housebuilding activity too, the body commenting in recent weeks that “despite the current political uncertainty we are seeing no sign of the demand for new houses slowing down.” What’s more, it was confident enough to predict that “given the continued focus on the housing shortage across all political parties, we believe that housebuilding will remain strong.”

Against this backcloth, City analysts are expecting earnings at Forterra to keep growing by mid-single-digit percentages over the next couple of years. Good rather than spectacular, but the same cannot be said of the company’s dividend yields for this period.

Thanks to predicted dividends of 11p and 11.6p per share for 2019 and 2020, respectively, yields for these yields clock in at an inflation-smashing 4% and 4.2%. There’s clearly a lot for income chasers to get stuck into, and particularly so for value chasers because of Forterra’s dirt-cheap forward P/E ratio of 10.3 times.

Another big yielder

That beautiful blend of low prices and big dividends also makes Nexus Infrastructure (LSE: NEXS) a great stock to put into your ISA this year.

Like Forterra this business — which is a provider of critical infrastructure, from concrete frames and drainage hardware to utilities connections — is well-placed to benefit from this rise in homebuilding rates in the future.

It’s why the number crunchers are predicting sustained profits growth over the next couple of years at least, leaving Nexus dealing on a prospective earnings multiple of 10.5 times. It’s also why dividends are predicted to keep rising, too, with payouts of 7.3p and 8.6p per share estimated for fiscal 2019 and 2020, respectively.

These figures yield 3.5% and 4.1% and make the construction colossus another share to seriously consider buying for an 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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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