You may have noticed that me and my Foolish colleagues love a Stocks and Shares ISA!
A big reason for this is because of the tax benefits of this type of investment vehicle. I don’t have to pay tax on capital gains and dividends from my stocks. Plus, there’s a juicy £20,000 yearly allowance, which is more than enough for me.
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.
With the financial year-end behind me, my focus is on stocks I can buy to boost my wealth moving forward with my new allowance.
Here’s one stock I’d love to buy as soon as I have some investable cash.
Savings and investments
M&G (LSE: MNG) is one of the leading savings and investments businesses around. The firm manages investments for individuals and large institutions, such as pension funds, around the world. With roots stretching back over 170 years, M&G is a trusted name in its market.
Market volatility hasn’t been kind to financial services stocks. I reckon M&G shares have been held back due to this.
They’re up 7% over a 12-month period, from 194p at this time last year, to current levels of 209p.
The bull and bear case
From a bearish view, the current economic struggles are a worry for me. As consumers battle with inflation, rising costs of living, including mortgage payments, energy, and food, investing and savings could take a hit. This could be bad news for M&G’s performance and shareholder returns.
In addition to this, a high debt-to-equity ratio of 1.9 is a worry for an investor like me, looking for the business to grow and provide me with juicy dividends.
On the other side of the coin, I’m a long-term investor, so I would look to buy and hold M&G shares for a five to ten year period at least. I can see any investment boosting my ISA. A big part of this is linked to the growing and rising age in population in the UK. Many will start thinking of planning for their formative years, and M&G’s presence and track record could lead them to the FTSE 100 incumbent. This could be good news for performance and return levels.
Next, the shares look very attractive on a price-to-earnings ratio of just 10. Plus, a whopping dividend yield of over 9% is enticing. However, it’s worth remembering that dividends are never guaranteed.
Finally, a 2023 final results update released on 21 March made for decent reading, in my view. The key takeaways for me were that net client inflows, operating profit before tax, and its dividend all increased. This is a positive update, despite recent turbulence.
Risk and reward
All stocks come with risks but the level of potential of rewards on offer from M&G make it a no-brainer buy for me and my ISA.
A solid track record, as well as good market position, attractive valuation, and a juicy passive income opportunity all help my investment case today.
