I’m looking for high-yield stocks to buy for my Stocks and Shares ISA before this year’s ISA deadline on 5 April. Today I’m going to consider three shares with 5% dividend yields. I reckon all three of these stocks have the potential to deliver strong growth from current levels.
A cheap FTSE 100 share?
My first pick is television group ITV (LSE: ITV). ITV’s share price has risen by around 10% over the last year, but I still think this business is probably too cheap.
City analysts expect ITV’s earnings to have returned to 2019 levels in 2021, with further growth expected in 2022. These estimates price the stock on just eight times forecast earnings. Dividends are making a comeback, too. Forecasts suggest a payout of 3.6p per share for 2021, rising to 5.9p in 2022 — that would give a 5% dividend yield.
Streaming television represents a risk to ITV’s ad-funded broadcasting business. But the group is working hard to turn streaming into an opportunity. The ITV Studios business produces programmes for ITV and other channels. By 2026, 25% of sales are expected to come from streamers.
I’m holding my ITV shares in a top-rated stocks and shares ISA. I may buy more before 5 April.
This business keeps vans on the road
Redde Northgate (LSE: REDD) probably isn’t a household name for you unless you run a fleet of vans. Northgate is one of the largest van hire companies in the UK and Spain, with a fleet of 120,000 owned and leased vehicles. The group also looks after over 600,000 vehicles operated by its clients.
Northgate’s merger with accident management specialist Redde in early 2020 means that the combined group now offers a full range of mobility services, including leasing, fleet management, repair, and resale.
One unusual aspect of this situation is that Redde Northgate has benefited from the global shortage of new vehicles. Profit margins have risen and resale values on used vans have been very strong. The main risk I can see is that when market conditions return to normal, we could see profits slump.
So far there’s no sign of this. I’m reassured by Redde Northgate’s recent performance and recently added the shares to my portfolio. Trading on just nine times forecast earnings, with a 5% dividend yield, they offer good value in my opinion.
A 2-for-1 stock for my Stocks and Shares ISA?
When a company splits itself into two, I’ve found it can often create opportunities for investors. The two separate companies are often valued more highly than they were as one. Sometimes they perform better, too.
I think that is what could happen at CMC Markets (LSE: CMCX). This online financial trading firm is thinking about separating its UK stockbroking business into a new company.
The risk, of course, is that sometimes a company splits itself to get rid of a bad business. One problem with CMC is that its profits can be volatile, depending on market conditions. I’m also not sure how profitable the stockbroking business might be on its own.
However, I’m comfortable backing the judgement of CMC founder Lord Cruddas, who still owns more than 55% of the business.
CMC’s earnings are expected to recover over the next year, pricing the shares on just nine times forecast earnings, with a 5.5% dividend yield. I’d be happy to buy at this level.
