I’ve made it my mission this year to make better use of my ISA. While I invested in it last year, I still had a chunk of my allowance left. This time around, I want to make sure I get as close to the £20,000 tax-free limit as possible.
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That’s why I’ve been on the hunt for stocks to add to it this month. I’m mainly searching in the FTSE 100. In the two below, I think I may have found my next candidates. If I had the cash, I’d buy them today.
NatWest
Let’s start by turning our attention to the banking sector and NatWest (LSE: NWG) in particular. The high street staple’s been soaring recently. The stock’s up 50.6% in 2024 and 43.4% over the last 12 months. Impressive.
That blows the FTSE 100’s 12-month return of 9.4% out of the water. But even after climbing, I still reckon NatWest’s more to give.
Its shares look cheap. They trade on a price-to-earnings (P/E) ratio of just 6.9. The FTSE 100 average is 11, so they come in comfortably below that. Looking ahead, its forward P/E rises slightly to 7.6. Even so, that still looks like cracking value.
While that valuation’s enticing, I reckon the star of the show is its dividend yield. Its payout currently stands at 5.4%, clearing the FTSE 100 average of 3.6% by some distance. Last year the firm raised its payout by 26% to 17p per share. Its interim dividend for 2024 jumped by 9%.
That was due to it posting a strong performance in the opening six months of the year. Second-quarter profits rose nearly 27% to £1.3bn. I was also excited by its move to acquire a £2.5bn portfolio of prime UK residential mortgages from Metro Bank.
In the times to come, there will be challenges. Falling interest rates pose the largest threat as they’ll shrink NatWest’s margins. There’s also the potential risk of a windfall tax being slapped on banks in the Autumn Statement.
But with its low valuation and meaty yield, I like the look of NatWest.
Unilever
I’m also a fan of Unilever (LSE: ULVR). Its 29.3% rise in 2024 and 22.6% over the last 12 months isn’t quite as impressive as NatWest’s surge. However, it’s certainly nothing to scoff at.
There are a few reasons I like Unilever. The first is its defensive nature. The business sells essential products that people need to use regardless of factors such as the state of the economy. That brings stability to my portfolio.
We saw the effectiveness of this in its latest results. Despite tough trading conditions, revenues climbed 2.2% and net profit rose 3.5%.
That said, the products Unilever sells are branded and are at a price premium. During the ongoing cost-of-living crisis, there’s the risk consumers may switch to cheaper alternatives.
But Unilever seems to be proving its resilience. What’s more, the stock has a 3% yield. That’s far from the highest out there. But Unilever boasts the impressive status of being a Dividend Aristocrat.
