Building a £1m ISA pot might seem like an unrealistic prospect at first, but I believe lender S&U (LSE: SUS) can help you get there.
This company, which is still family operated, has generated a tremendous amount of wealth for shareholders over the past 10 years. According to my research, the stock has produced a total return for investors of 23.9% per annum in the past decade, more than doubling the overall market return over the same time frame.
And I see no reason why S&U cannot continue to beat the market over the next decade. Today, the group unveiled a record set of results and the 10th year of profitable growth. Overall profit before tax increased to 14% to £34.6m.
Advantage Finance, S&U’s Grimsby-based motor finance business was the most significant contributor to the bottom line, reporting a profit before tax for the year of £33.6m — the 19th consecutive year of record profitability for this business division.
Quality business
Even though past results are never a guide to future performance, S&U’s track record over the past two decades implies that the company is well prepared for whatever the world throws at it. The fact that the business was able to survive the financial crisis (and continue to produce record profits) when so many of its larger, more liquid peers collapsed, stands testament to management’s stewardship.
That’s why I am recommending the company for an ISA today. As well as its impressive track record, the stock also yields 7% (although after jumping 12% following today’s record results the yield has dropped to 6%) and trades at a P/E of just 8.
According to my calculations, if the company continues to compound investor capital at 23.9% per annum, it will take just 17-and-a-half years to turn a £20,000 ISA investment into £1m.
Bricks and mortar
Another stock I believe has the potential to make you a million is property developer U and I Group (LSE: UAI).
U and I has an attractive business model. The company develops properties and returns the profits to investors while retaining a portion for further reinvestment. In this financial year, the business is targeting £45m to £50m in development and trading gains, similar to the goal laid out last year.
If the company meets its target, the City believes it could pay out 13.4p per share in dividends for 2019, giving a dividend yield on the current price of 7.2%. At the same time, it looks as if the stock is trading at a significant discount to the gross value of its development assets.
According to the group’s figures, at the end of August 2018, U and I’s net asset value per share was 284p. Even though this number is now a few months out of date, I think it is still relatively reliable and tells us that shares in the company are trading at a discount of nearly 30% to net asset value.
So, if you’re looking for a cheap property stock yielding more than double the market average, then I strongly recommend taking a closer look at U and I. When combined in a portfolio with S&U, this property income play could also help you reach that £1m ISA target.
