MENU

5 Great ISA Picks

There are only a few days left to use of the last of your old ISA allowance, so you’d better get moving if you don’t want to waste it.

And if it’s already used, you’ll have a whole new allowance (which will rise to £15,000 in July) for 2014-15, so which companies should you consider? Well, for me, the best use of an ISA is for stashing away investments for the very long term — until retirement, for example.

So here are five that I think should stand the test of time, showing some basic measures together with historic 10-year price appreciation:

Company Price P/E Divi 10-year
Aviva 490p 10.1 3.5% -16%
Barclays 246p 8.7 4.0% -48%
National Grid
822p 15.7 5.1% +77%
Rio Tinto 3,336p 9.9 3.7% +190%
Royal Dutch Shell 2,334p 11.2 4.9% +83%

P/E and Dividend yields are forecasts for next year-end.

Aviva

AvivaInsurance really is a long-term business, and though it can be erratic over the short term, it has a habit of coming out ahead over the decades. Aviva (LSE: AV) had to slash its dividend in 2012 — it had paid an overstretched 8.6% the previous year. But even after that, a forecast yield of 3.5% is better than average, and Aviva’s future growth prospects are looking good.

The share price is down over 10 years, but that did include the credit crunch and recession, and there were good dividends to compensate. With a forward P/E of 10.1 (dropping to 9.3 for 2015), the shares look oversold and a good long-term bet.

Barclays

barclaysBarclays (LSE: BARC) has been through the wars, and is today looking the least risky of the five FTSE 100 banks — and the sector is surely emerging into a new light after the dark years. Barclays’ liquidity ratios are looking strong now, good dividends are expected (4% this year, 5.6% next), and with a forward P/E of under 9 the shares are just too cheap.

And Barclays doesn’t have the same risky exposure to an overheating China that is worrying shareholders of HSBC and Standard Chartered now.

National Grid

The utilities companies pay some of the steadiest dividends in the market, and as the provider of distribution infrastructure in the UK, National Grid (LSE: NG) is at lower pricing risk than some in the government’s eye — in fact, while some utilities share prices have fallen over the past 12 months, National Grid is up 5%.

Those 5% dividend yields look very attractive to me.

Rio Tinto

rio tintoRio Tinto (LSE: RIO) is in a depressed sector, but one which is recovering — in fact, Rio set new production records for iron ore, bauxite and thermal coal in 2013, despite the alleged slowdown in demand from China (which is still growing its economy at 7.5% per year). Over the long term, Rio Tinto’s earthly delights will be in great demand, of that there is really no doubt. And if you can get in when the sector is in a cyclical downswing (a P/E of under 10 is a steal), so much the better.

Royal Dutch Shell

You just have to have an oil & gas supplier, don’t you? Over the next 20-30 years, demand is going to be very strong and the profits will be handsome. Why Royal Dutch Shell (LSE: RDSB)? To be honest, I think either Shell or BP would be just fine, but BP still has a bit more recovery needed before it gets back to earnings growth — though over 20 years, well, take your pick.

If you use your ISA allowance for a diversified portfolio of shares like these and keep them for decades, you could even be on your way to a million-pound pot by the time you retire -- and our expert Motley Fool report Ten Steps To Making A Million In The Market can help you get there.

The report is free, but hurry while it's still available -- just click here to get your copy today.

Alan does not own any shares mentioned in this article.