The Stocks and Shares ISA deadline is fast approaching on 5 April. Today, I want to look at two FTSE 100 stocks I’d buy ahead of the deadline for a starter share portfolio.
My analysis suggests both of these shares have the potential to deliver an attractive mix of income and growth over the coming years.
A 7% dividend yield I’d trust
My first pick is FTSE 100 insurance and retirement group Legal & General (LSE: LGEN). This £16bn company is familiar to most of us through products such as pensions or life insurance. But I think the real story is a bit more interesting than that.
Over the last decade or so, Legal & General boss Nigel Wilson has invested heavily in real assets such as renewable energy, commercial property, and data centres. The group is also investing in residential property.
On the whole, I think these assets have provided much stronger returns than more traditional financial investments, such as government bonds.
The only real risk I can see is that, for me as an outside investor, Legal & General is pretty much a black box. There’s no way I can understand the detail of its finances. I don’t know what impact falling property prices might have, for example. And I don’t know if the company’s assumptions about future income are reasonable.
What I do know is that results so far seem to support Wilson’s strategy. Legal & General’s profits have risen consistently in recent years. Unlike many rivals, it didn’t cut its dividend in 2020. Indeed, the company’s payout has risen by 33% to 17.8p per share since 2015, giving this FTSE 100 stock a 6.8% dividend yield.
My sums suggest Legal & General’s dividend looks pretty safe. I added the shares to my top-rated stocks and shares ISA account last year.
A 2-for-1 deal for a Stocks and Shares ISA
The other company I’d consider buying for a starter portfolio today is pharmaceutical group GlaxoSmithKline (LSE: GSK). Although the shares have traded sideways since 2013, things are about to change.
Later this year, this £80bn business will split itself in two. So-called New GSK will be a pure pharmaceutical business that’s focused on developing important new medicines.
Meanwhile, GlaxoSmithKline’s existing consumer healthcare division will be separated into a new company. This business owns brands such as Sensodyne, Panadol and Nicorette. In my view, it’s more of a consumer business like Unilever or Reckitt than a pharmaceutical operation.
I’m interested in owning shares in the consumer business. I’ve become even more bullish since GSK announced that former Tesco CEO ‘Drastic’ Dave Lewis will chair the new company. I think Lewis achieved excellent results at Tesco. I don’t think he’d take this role if he wasn’t confident he could do well again.
Of course, Glaxo’s future success isn’t guaranteed. Developing new medicines is a slow and expensive process that doesn’t always go to plan. The consumer business is likely to be lumbered with a lot of debt to start with, which could limit shareholder returns.
Even so, I believe GlaxoSmithKline shares offer good value today as a long-term investment. GSK would be on my shopping list if I was setting up a new portfolio in my Stocks and Shares ISA.
