Have £10k to invest? I’d ditch a Cash ISA and buy these 2 FTSE 100 shares right now

G A Chester highlights two FTSE 100 shares that he thinks could knock spots off cash and produce impressive total returns in the coming years.

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Investing in FTSE 100 shares could be a wiser move than saving money in a Cash ISA. The best interest rate on an easy-access Cash ISA right now is just 0.65%. As the current level of inflation is 0.7%, the real value of your savings is being nibbled away. Furthermore, interest rates aren’t forecast to increase significantly over the coming years.

As such, investing in higher-yielding FTSE 100 shares, in a Stocks and Shares ISA, could be a much better strategy. Sure, there’s always a risk of the capital value of a stock falling. But this risk can be reduced by investing across a diverse range of businesses.

With this in mind, here are two FTSE 100 stocks that pay generous dividends. These could help supercharge the return on your savings, and lead to impressive capital and income growth in the long run.

One of the most reliable FTSE 100 shares

National Grid (LSE: NG) is the biggest utilities company listed on the London Stock Exchange. At a current share price of 935p, its market capitalisation is £33bn.

The group is a monopoly owner and operator of big chunks of the UK’s vital gas and electricity infrastructure. It also owns regulated assets in the north east of the USA. It’s a capital-intensive business, meaning it has to make substantial long-term investments. The reward for this is a regulatory framework that allows reasonable and reliable returns for shareholders.

National Grid paid a dividend of 48.57p per share for its last financial year. This was a rise of 2.8% on the previous year, in line with its policy of annual increases matching RPI inflation. At the current share price, the running yield is 5.2%.

I’d be happy to buy shares in this FTSE 100 utilities giant due to the generous yield. But also because of the nature of its business and record of reliable dividend increases.

Mining dividends

Precious metals miner Polymetal International (LSE: POLY) is among the world’s top 10 gold producers and top five silver producers. Its assets are in Russia and Kazakhstan. At a current share price of 1,690p, its market capitalisation is £8bn.

The company’s trailing 12-month dividends total $1.02 per share (65.3p at the conversion dates). Therefore, the running yield is 3.9%.

However, City analysts are expecting a big uplift ahead, in part due to the company’s recently revised dividend policy. A payout of $1.34 per share (101.5p at current exchange rates) is forecast for 2021. This produces a yield of 6% for buyers at the current share price.

I’d be happy to be one of those buyers. The company has a strong committment to providing shareholders with “superior sustainable dividends.” And I reckon the prospect of a 6% yield for starters is highly attractive.

FTSE 100 shares knock spots of cash!

In summary, and in my opinion, National Grid and Polymetal International are two strong picks for a portfolio of diversified FTSE 100 shares. There are currently a good number of blue-chip businesses with solid long-term growth potential and appealing dividend yields that knock spots off cash. Therefore, a portfolio of such stocks could produce impressive total returns in the coming years.

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.

G A Chester 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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