We’re rushing towards the 5 April ISA deadline. So I reckon it’s time to use up as much as we can of our current allowance. And what better than cheap FTSE 100 stocks?
With share prices still depressed, I think there are some great buys out there right now.
Best UK bank?
Bank valuations are low, and that puts them at the top of my ISA list. It’s hard to pick the best buy. But I think it has to be NatWest Group (LSE: NWG).
Over five years, the shares have beaten Lloyds Banking Group, but they still offer a better dividend yield at 7.1%.
The government still holds a chunk of the stock. And there’s talk of a sale later this year, which could keep the share price down. They’d have to sell at an attractive price.
Still, in my view, that could just extend the great winter sale on banking stocks into the summer, and give us a chance to buy more with our next ISA allowance.
In fact, the economic outlook could keep bank share low for a while yet. But that would be great for mopping up those big dividends cheap, right?
What, no dividend?
My next pick has no dividend. And it’s in a sector I’d usually avoid. I’m actually thinking of buying International Consolidated Airlines (LSE: IAG) shares.
After falling 75% in five years, the price surely can’t get any lower, can it?
Well, yes, it could. The outlook for aviation is still dodgy. And world peace looks ever more distant as we head into 2024.
The British Airways owner is also in a very competitive business, at the mercy of fuel costs. And it competes almost solely on price.
Ace investor Warren Buffett famously said “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” But, sometimes, I think the latter can still make us a nice profit.
We’re looking at a forecast price-to-earnings (P/E) ratio of only four here. Even with the risk, I’m tempted.
Big debt
While I’m in a contrarian mood, I’m rethinking BT Group (LSE: BT.A). I’ve shunned the stock so far, due to the debt.
But BT seems committed to its dividend policy. And with the shares down 50% in five years, the yield is now up to 7%.
The fall has dropped the P/E to under seven. Is that low enough to cover BT’s debt risk? I think it just might be.
If BT can service its debt, and if it can keep its dividend going, why care about anything else? Why not switch off and just pocket the cash?
Big ifs, yes, and a dividend cut could be a disaster. But the cost of it wouldn’t make much of a dent in the debt anyway.
Am I a bit irresponsible with an attitude like this? Well, I’d only put a small amount in BT compared to my main safe stocks. I might go for it.
