Looking for top stocks to buy for this year’s Stocks and Shares ISA? I’m eyeing up two with fat dividends that I think might be set for a new golden age.
One is Land Securities Group (LSE: LAND). It’s a FTSE 100 real estate investment trust, and it offers a forecast 8.4% dividend yield. The dividend alone is better than the annualised FTSE 100 returns of 6.9% over the past 20 years.
It could be enough to turn a £20,000 ISA allowance into a shade short of £100,000 in 20 years with dividends reinvested. That’s without adding an extra penny, and with no share price gains.
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.
Dividend outlook
Dividends can never be guaranteed. And before Covid did some real damage to commerical real estate business, the Land Securities share price and dividend cash were both higher. We probably shouldn’t expect downturns quite that dramatic very often, but I’d still diversify away from any single sector.
The current dividend outlook looks good. For the year ended 31 March, a dividend of 40.4p per share was covered 1.25 times by earnings of 50.3p. I reckon that’s solid enough for this sector.
The trust invests in offices, shopping centres, and retail parks. That leaves it open to risk from any economic weakness, and we’ve seen plenty of that.
But I’m positive about the long-term outlook for UK business — if I wasn’t, I wouldn’t be in investing in FTSE 100 shares at all. For anyone who shares my optimism, I think Land Securities has to be a good value stock to consider as an ISA candidate.
Buy the business
Companies directly involved in the investment business itself also suffered badly in the 2020 crash. And that includes my second pick, M&G (LSE: MNG), which provides savings and investment services.
The share price is starting to recover since the slump, gaining 30% so far in 2025. But even after that, the forecast dividend yield is still as high as 7.7%. Do we think the UK stock market is likely to carry on with its century-plus record of beating other forms of investments hands down?
I do, and it makes me wonder why shareholders shunned a company like this for so long.
More volatile
There are always some risks with buying into the investment business itself. Firstly, stocks like this can be more volatile than the market itself, as investors often overreact.
They typically pile in when prices are rising, and sell too much when they’re falling. That’s what made M&G a cracking buy in my eyes in 2020. And I think it still looks good value today.
The dividend needs watching. If it has to be cut the next time markets dip, I expect a good few will dump the shares and send the price down again.
But this is another case where investors need to prioritise a long-term outlook over short-term ups and downs — and maybe see the downs as extra-special buying opportunities to consider.
I can’t really say these are the best value FTSE 100 shares, as that depends on individual investors’ requirements. But they’re both near the top of the list of characteristics I look for.
