The end of the 2021/22 Stocks and Shares ISA year came and went earlier this month. It means that investors now have a fresh £20k contribution limit to enjoy over the next 12 months. It doesn’t mean that anyone should rush to use this up as soon as possible. Rather, it’s important to build a watchlist and then selectively buy when opportunities arise. Here are some high-yield options that are worth considering.
Tapping into emerging markets
Ninety One (LSE:N91) is an investment manager listed in the FTSE 250. It caters to a wide range of clients, but has an investment focus tilted towards the emerging markets. Over the past year, the share price has fallen by 28%. This is one factor that has pushed the dividend yield up to 7.61%.
The focus on emerging markets is something that can give investors the kind of exposure they’d struggle to replicate directly. This isn’t just due to the physical areas that are targeted. Ninety One does invest in stocks, but also fixed-income, specialist credit and other alternative financial assets.
The fall in the share price over the past year closely correlates to the choppy financial markets due to the high-inflation, higher-interest-rate environment. As a result, the business saw £3.2bn in client fund outflows in the half year through to November.
This remains a risk going forward, but I feel markets have now digested and are caught up with the lay of the land. That’s why I feel buying at current levels for the high yield could be a good option.
Renewable energy in the spotlight
The second stock for an ISA watchlist is Riverstone Credit Opportunities Income Trust (LSE:RCOI). It might be a bit of a mouthful to say, but the trust has a lot worth talking about. The current dividend yield is 8.99%, with the share price up 13% over the past year.
In a nutshell, the company provides funding and other credit options to help raise capital for projects in the energy sector. This includes conventional energy and also a push towards renewable energy. I think this focus could make it a strong candidate for long-term profitability. Instead of some other sectors that are stagnant, I feel the renewable energy space is primed to grow for the foreseeable future.
Risks and rewards
Naturally, there are risks in this space. Infrastructure projects are expensive to fund, meaning that a lot of money can be tied up in one area. It’s also illiquid, meaning that the managers can’t simply sell an asset as quickly as selling a normal stock or bond.
Yet the high income potential on offer is very appealing. When this is combined within the ISA, an investor doesn’t have to pay dividend tax. This allows more of the dividend to be kept, which can then be reinvested to help compound future returns.
Both options are on my ISA watchlist for the coming months and I feel they could be of value to many income orientated investors out there.
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.
