You have until 5 April to use up this year’s £15,000 ISA allowance, and then from 6 April there’s another £15,240 covering cash or shares with all returns tax free. That means you need some share ideas, so here are three that have been in the dumps and are looking good now:
Gas for your portfolio
Centrica (LSE: CNA) gave investors an unpleasant surprise when it sliced its dividend for 2014, by 21% to 13.5p, as profits fell. But even after the cut, it still yielded 4.8%, and that’s way above the FTSE 100 average of around 3%. The share price took a tumble, and is down 24% over the past 12 months to 245p.
The 2015 dividend consensus has been reduced, and if it remains unchanged at 13.5p it would still yield 5.5% on today’s price. As a comparison, a full ISA allowance invested in the owner of British Gas and Scottish Gas would net you £838 in dividends alone, while the same in the best cash ISA would get you only around £240 in interest.
Centrica’s forward P/E has dropped to under 13 now, and for me that’s cheap for a company still paying strong dividends — it deserves consideration for your ISA.
Which bank?
The banks are coming back to strength, so how about Banco Santander (LSE: BNC)(NYSE: SAN.US) as a perhaps non-obvious choice? Under previous boss Emilio Botín, Santander offered huge dividends in excess of earnings, made possible because most Spanish shareholders took scrip instead of cash. But that eventually dilutes the shares, and now that daughter Ana Botín has taken over the chair after her father’s death, the bank is moving towards more conventional payments.
As from 2015, the dividend yield should be down around the 3.6% mark, which is still healthy. And with the shares down 12% over 12 months to 475p, we’re looking at a forward P/E of under 9, dropping to under 8 on 2016 forecasts.
Banco Santander is the largest bank in the eurozone, and looks cheap to me at today’s price.
A miner?
The mining business has been in trouble too, and BHP Billiton (LSE: BLT)(NYSE: BBL.US) shares are down 16% over the past year to 1,586p. But it’s a cyclical sector, and the price has actually recovered by 24% since a mid-December low. And though profits are down due to depressed commodities prices, BHP is still managing to raise production and shipments of its key products.
With EPS predicted to fall 37% for the year to June, the shares are on a P/E of 15. But the expected dividend yield stands at 5.1%. BHP is proposing a demerger under the name South32, and has said that if it goes ahead the dividend will not be rebased. An ISA full of BHP Billiton would provide £792 in dividends.
