With less than two weeks until the 2024/25 Stocks and Shares ISA allowance runs out, I have been squirreling away as much cash as I can lay my hands on. As with previous deadlines, my firm choice remains blue-chip FTSE 100 stocks paying inflation-busting dividends.
The reason is simple. I believe that a growing number of investors are beginning to appreciate the importance of high-quality dividend-paying stocks in helping to build long-term wealth. And with both the US and UK economies treading on particularly shaky ground at the moment, I really don’t expect this trend to change anytime soon.
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Sprinkle of gold
One stock that I have been loading up on recently is leading Mexican gold and silver producer Fresnillo (LSE: FRES). Its share price may have more than doubled over the past year, but it’s the dividend that is becoming increasingly attractive to me.
Following a blow out set of results in FY24, shareholders are in line for a bumper set of returns in the next month. On top of a final ordinary dividend, it intends to pay out a one-off special dividend of 41.8 cents in April. Excluding the already paid interim dividend, the yield for 2024 is 5.6%.
In sync with rising gold prices, which recently surpassed $3,000, I expect silver to really make a move in 2025. The gold-to-silver ratio currently stands at nearly 90, one of its highest in history. I expect that ratio to fall in the coming years. This means higher silver prices will likely further enhance the company’s margins.
The miner does face plenty of risks. Soaring labour and energy costs have been a major contributor of poor profits recently. But it has faced bigger challenges over its 500-year mining history.
Insurance giant
I have long been an admirer of Aviva (LSE: AV.). The problems that beset the company for several years are well behind it now. A leaner, more focused business has been a cash cow for investors since Amanda Blanc took the reins.
As with Fresnillo, the share price has had a good run up as of late. However, unlike with the miner, I don’t expect much forward action in 2025. But the juicy forward dividend yield of 6.8% highlights its stalwart income credentials.
Its share price may be fairly valued today, but that doesn’t mean that the stock doesn’t have bags of growth potential in order to support its growing dividend.
The recent acquisition of Direct Line Group is a real coup. It brings together two highly complementary businesses, both with leading positions in personal lines of insurance. DLG has a very impressive portfolio of brands including Direct Line, Churchill, and Green Flag.
The buyout will also provide Aviva with significant cost savings. These include a merger of back-office functions and consolidation of support services, in particular call centres.
But any large acquisition does bring with it significant risks. Some of them might not seem so obvious at first sight. Take merging IT systems. There are plenty of examples in the past of it actually costing companies a lot more than they initially envisaged. Nevertheless, I see Aviva as a no-brainer for my Stocks and Shares ISA.
