My Stocks and Shares ISA has two roles. The first is to build up my wealth while I’m working. The second is to release income after I retire.
I’ve got some whizzy growth stocks in there, including cosmetics maker Warpaint and outsourcing firm Costain Group. But I’ve also got a heap of income-paying FTSE 100 blue-chips, and I’m pinning most of my hopes on them.
Today, they’re largely overlooked by investors, who would rather ride with the Magnificent Seven US tech heroes. My FTSE faves may be a little boring but they’re beautiful in their own way.
FTSE 100 beauties
I prefer to buy stocks when they’re out of favour, rather than riding high. That allows me to pick them up at a discounted price, and secure an elevated yield.
My view is that UK dividend stocks would swing back into favour once interest rates peak and savings rates and bond yields fell. That scenario has taken longer to pan out than I hoped, but it should happen at some point. And when it does, I hope to bag some share price growth on top of my dividend income.
My favourite less-than-magnificent seven blue-chips are GSK (LSE: GSK), Lloyds Banking Group, Legal & General Group, M&G, Phoenix Group Holdings, Unilever and Taylor Wimpey.
They’re dull compared to, say, Nvidia and Tesla, but do offer the occasional flash of excitement.
The Taylor Wimpey share price is up 33.79% over the last year. And it still has a trailing yield of 6.1%. Lloyds is up 29.11% and yields 4.64% (that’s forecast to hit 5.5%).
The Phoenix share price has been boring for yonks but it does yield 9.92%. It was a beautiful day when the last dividend hit my portfolio.
Dividend income heroes
GSK‘s been interesting, but in the wrong way. I bought its shares in March and again in June, thinking it was due a share price recovery. So far, I’m down 10.73%. These are early days but I expected better. Over one year, they’re up 8.61%.
Pharmaceutical stocks are thought to be defensive but can also be volatile. Bringing new treatments to market is a tortuous process, with potential failure at every turn. Even the blockbuster successes will come off patent at some point, hitting sales, so exciting new treatments need to be found.
Plus there’s the threat of litigation. GSK’s heartburn treatment Zantac has been accused of causing cancer. News that cases would go to trial in the US knocked 10% off the GSK share price in a single day. It has yet to recover and probably won’t until the trial is done. And maybe not even then if the verdict goes the wrong way.
I’ll stick it out though. Over the longer run, I think GSK shares will come good, and today’s so-so 3.89% yield will finally recover.
These seven oh-so-boring stocks will sit in my Stocks and Shares ISA for years doing their thing. When I retire, I expect them to deliver a stream of tax-free income, and maybe some capital growth too. Beautiful.
