2 UK shares I’d buy and hold in a Stocks and Shares ISA for the long term

Harvey Jones is keen to start using this year’s Stocks and Shares ISA allowance. These two FTSE 100 companies are high on his wishlist.

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My £20,000 Stocks and Shares ISA limit is sitting there waiting to be filled and I can’t wait to get stuck in. I’m drawing up a hit list of top FTSE 100 blue-chips I’d be happy to buy and hold all the way to retirement and beyond.

I’m looking for top companies that have been overlooked by the market and are cheap as a result, while offering above average yields. These two leap out at me.

Oil and gas giant BP (LSE: BP) has been hovering around the top of my buy list for months. I’d have bought it on several occasions, if I’ve had enough cash. Sadly, I can’t afford to buy every stock I like.

FTSE 100 opportunities

I’m building my ammunition because with the oil price idling at around $80 a barrel, BP shares look priced to go. While the FTSE 100 has repeatedly broken all-time highs over the last month, BP shares have fallen 4.68%. They’re up just 1.95% over the past year.

That doesn’t put me off. Quite the reverse. The stock looks super cheap, trading at 7.1 times earnings. The rebased dividend is offering a halfway decent yield again, at 4.66%. That easily beats the FTSE 100 average of 3.36%.

There are risks, of course. In the short term, oil prices could fall further, making BP shares even cheaper. In the longer run, a green energy breakthrough could deliver a mortal blow to fossil fuels. Politically driven windfall taxes are a menace whenever profits pick up.

Yet in the longer run I think BP can deliver both share price and dividend growth, and I want my share of it. I’m keen to buy while it’s still cheap.

The other FTSE 100 company that’s been vying for my attention is mining giant Rio Tinto (LSE: RIO). The commodity sector has been rocked by falling demand from China, whose economy now seems hooked on stimulus.

Another dividend hero

Yet with Beijing trying to revive the economy and Western countries engineering a potential soft economic landing, the Rio share price has picked up. It’s climbed 17.71% over 12 months, yet is valued at just 10.2 times trailing earnings. That’s nicely below the FTSE 100 average of 13 times.

Like BP, Rio Tinto shares give me a handsome income, with the hope of more to come tomorrow. It’s forecast to yield 5.9%, covered 1.7 times by earnings.

My concern is that China’s voracious consumption of metals and minerals will slow even faster than markets anticipate. Natural resources stocks are famously cyclical, and we’re heading into the traditional summer slowdown. I plan to pounce on any sign of weakness (while hoping the stock won’t climb higher before I have cash to hand).

When central bankers finally start cutting interest rates, hopefully this summer, I’d expect both BP and Rio Tinto enjoy a rerating. I hope to add them to my Stocks and Shares ISA before that happens, while they’re cheap, rather than afterwards. Then I’ll simply leave them there for years, and hunt for the next FTSE 100 shares to buy.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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