The Individual Savings Account (ISA) can substantially boost an investor’s returns over time.
Brits can buy a wide range of shares, trusts, and funds in one or both of a Stocks and Shares ISA and Lifetime ISA. Unlike with a General Investment Account (or GIA), an individual doesn’t have to pay a penny in tax on capital gains or dividend income with an ISA.
Over time, this can add up to perhaps tens of thousands of pounds worth of savings. And, in turn, individuals have even more cash to use to supercharge their portfolio through the miracle of compound gains.
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With this in mind, here are two high-yield dividend shares I think are worth close attention today. If bought in an ISA, an individual wouldn’t have to worry about dividend tax. This kicks in on dividend income above £500.
The PRS REIT
Real estate investment trusts (REITs) are shares that are specifically designed to provide investors with abundant passive income.
These businesses receive tax perks of their own (such as corporation tax exclusions). In return, they must pay a minimum of 90% of profits from their rental operations out in the form of dividends.
Residential property specialist The PRS REIT (LSE:PRSR) is one top trust to consider right now. By focusing on an ultra-stable property sector, it receives stable income flows at all points of the economic cycle, and therefore the means to pay a decent dividend.
This isn’t the only reason why I like it. Britain’s housing crunch means private rents continue to soar at spectacular pace, giving the trust’s earnings a significant boost.
Latest Office for National Statistics (ONS) data showed private residential rents soar 8.4% in the 12 months to September.
Recent price gains mean PRS REIT’s dividend yield has dropped to 3.9%. Its shares have risen on hopes that interest rates will steadily fall, boosting net asset values (NAVs) and reducing borrowing costs.
Naturally, PRS may slide if the Bank of England doesn’t meet the market’s rate expectations. But on balance, I think it’s an attractive dividend stock to consider today.
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.
Assura
Assura (LSE:AGR) is another REIT with exceptional defensive characteristics. As an owner and operator of primary healthcare facilities, rent collection remain robust at all points of the economic cycle.
This isn’t all. Its rental contracts are inflation linked, which provides a cushion against rising costs. And the trust’s tenants are tied down on ultra-long contracts. The weighted average unexpired lease term here sits at 26 years.
My main concern here are future changes to NHS policy that could impact earnings. But right now health strategy remains favourable for the company, as high hospital waiting lists are pushing investment in primary healthcare assets like GP surgeries.
I think Assura has terrific growth potential, too, as the UK’s elderly population drives demand for healthcare provision.
With its 8.5% forward dividend yield, I think it’s another top passive income stock to consider.
