FTSE 100 shares I’d buy before the 5 April ISA deadline

The Stocks and Shares ISA deadline is fast approaching. Harshil Patel considers the best FTSE 100 shares he’d buy to maximise his returns.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Stocks and Shares ISA deadline is fast approaching. I’ve got until 5 April to maximise as much of this year’s tax allowance as I possibly can. I’ve got some savings that I’d like to add to my ISA and I’m currently looking for the best FTSE 100 shares to buy.

I don’t need to buy shares as soon as I’ve added funds to my ISA, but given recent market turmoil, I think there are some bargains available.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

FTSE 100 sale

As a long-term investor for many years, I know that share prices rise and fall. Quite often, stock market declines can be an opportunity for me to buy quality UK shares at lower prices. A bit like a clearance sale.

As the FTSE 100 index includes the UK’s largest 100 listed companies by market capitalisation, that’s where I’d start. It’s full of established companies, many of which are household names.

Right now, I reckon the UK is one of the cheapest developed markets in the world. Recent share price falls have also caused the average FTSE 100 dividend yield to rise to 3.9%. That’s great news for income investors like myself.

Although I own a broad selection of growth stocks, and value shares, I also own many dividend shares. Yes, these shares can grow at a relatively slower pace, but I like the regular income that they provide.

10% dividend yield!

One FTSE 100 share that I reckon is both on sale and offers an excellent dividend yield is Imperial Brands. It currently trades on a price-to-earnings ratio of just 6 times and offers a market-leading dividend yield of 10%.

Analysts expect sales and earnings to rise modestly over the next few years. That said, it will need to carefully manage regulatory change. It’s a feature that is common in the industry, but Imperial has much experience in managing the impacts.

Overall, it’s a highly cash-generative business with a large portfolio of established brands. I reckon it offers excellent value and would consider adding it to my ISA.

Defensive quality share

My next FTSE 100 share that I’d buy is drinks maker Diageo (LSE:DGE). Its shares have dropped by 14% this year, and it’s now trading at the same price as last summer. But little has changed regarding the fundamentals of this company to warrant such a discount, in my opinion. It’s a high-quality business that I’d be happy owning for many years.

In the current climate, it’s nice to own some defensive shares. And I reckon it doesn’t get much more defensive than Diageo. It owns many major brands, including Guinness and Smirnoff, and has a history spanning centuries. I think plenty of these brands will still be thriving in the decades to come.

That said, commodity costs are rising fast and Diageo will need to carefully manage any potential cost pressures.

Looking at the numbers, I like that this Footsie drinks giant operates with a 30% profit margin. It also offers a return on capital employed of 17%, a key measure of business quality. Overall, I reckon the share price fall has created an opportunity to add these quality shares to my 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.

Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo and Imperial Brands. 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »