With only a few days to go before the 2022 ISA deadline, I’m thinking of what I might buy with £5,000. And even if I miss the deadline, £5,000 would make a very nice start to my next annual Stocks and Shares ISA.
I already own some core FTSE 100 shares for long-term income, so today I’m widening my horizons a little and looking for smaller stocks. Maybe I can find some of the best in the FTSE 250.
Insurance dividends
I like the look of Direct Line Insurance Group (LSE: DLG). This company has had a rough few years, with earnings slipping. And the share price has fallen 13% over the past 12 months. That pushes the dividend yield up above 8%, though it was only thinly covered in 2021.
The company is in the midst of implementing FCA regulatory changes to pricing practices. But it says its “strong strategic progress and disciplined approach to trading throughout 2021 mean we were well placed as we entered 2022“.
My big fear is that if we see more pressure on earnings, the dividend could suffer. But Direct Line is engaged in a new share buyback, which suggests it expects to generate the cash to keep paying.
Insurance earnings can be cyclical, and that is among the risks too. But with a long-term investment horizon, I might buy Direct Line before the Stocks and Shares ISA deadline.
The business of investing
I like investing in companies that themselves are in the business of investing. By that I mean investment trusts, fund managers, and similar.
Today, I’m examining Jupiter Fund Management (LSE: JUP), and I am definitely considering buying its shares before the ISA deadline.
Earnings have been a bit flat for a few years. But with the turmoil surrounding the investment sector, that doesn’t surprise me too much. The dividend has remained steady and well covered.
Jupiter shares are down 24% in the past 12 months, with most of that happening this year. I’m guessing its mostly down to geopolitical factors. The fall puts the shares on a low P/E of 10 based on forecasts. And if the dividend is maintained again, it would yield 8.2%.
Strong competition and external threats could put pressure on the dividend. But, on balance, Jupiter is an ISA buy candidate for me.
ISA deadline
My third possible buy ahead of the 2021-22 ISA deadline is comparison site Moneysupermarket.com (LSE: MONY). Again I’m looking at a fallen share price, this time down 26%. And again, I’m drawn to the boost it has given to the dividend.
The yield reached 5.4% in 2021, but it was only barely covered by earnings. These earnings have been dropping, with fewer people comparing holiday prices, savings accounts, etc, under pandemic and other pressures.
We now face the prospect of soaring inflation, rising interest rates, and an economic squeeze. So business could be tough for the next year, or so. I reckon I’m seeing probably the greatest chance of a dividend cut here among those I’m examining today.
I think Moneysupermarket.com is possibly the riskiest investment of the three, at least in the short term. But I also see attractive long-term potential. And, again, I am tempted to buy before the ISA deadline.
