The Motley Fool

Top income picks for your ISA portfolio

With cash ISA rates still pitifully low, those desperate for income should really consider funnelling any remaining allowance into those companies offering bumper payouts to shareholders. Here are what I believe are three of the best dividend picks at the current time.

Dividend delights

Back in January, drinks wholesaler, distributor and owner of Wine Rack, Conviviality (LON: CVR) released a very positive set of interim results to the market.

In the 26 weeks to the end of October, revenue at the Crewe-based business rocketed 211% to £782.5m and profits before tax flew 285% higher to £7.4m. With all three units (Direct, Retail and Trading) performing well and recent acquisitions being integrated ahead of schedule, the company now expects to deliver synergies of £6m in FY17.  

Trading on under 13 times earnings for 2017, Conviviality’s shares still look great value to me, particularly when compared to highly valued industry peers such as Diageo. What’s more, they come with a rather chunky 4.7% yield that’s forecast to rise even higher in 2018, assuming earnings estimates are achieved. 

Big Game

Another top dividend share would be Games Workshop (LSE: GAW). A big exporter and major beneficiary of sterling’s slump, the £303m cap fantasy figurine maker also released a cracking set of results in January.

From May to November last year, revenue hit £70.9m — a 28% increase compared to the same period in 2015. Thanks to excellent performance in both retail and trade channels, the company also announced pre-tax profits of £13.8m — a rise of more than 50%.

Yours for 14 times earnings (despite almost doubling in price over the last year), shares in Games Workshop currently offer a yield of over 5.8%. For comparison, that’s almost six times what you would get from the best instant access cash ISA on the market. 

My final selection would be housebuilder Crest Nicholson (LSE: CRST).

Back in January, the £1.4bn cap revealed revenues of £1bn for 2016 (a rise of 24% on the previous year) and pre-tax profits of £195m (up 27%). Even more impressively, the company managed to move into a net cash position of £77m — a dramatic improvement on the £30.6m of net debt on the balance sheet in 2015. With consistently impressive annual returns on capital and high operating margins, Crest also bears many of the hallmarks often seen in quality businesses.

Trading on just eight times earnings for 2017 and boasting a price-to-earnings growth (PEG) ratio of just 0.8, shares in Crest should to appeal to both value and growth hunters. But what about those dividends?

For 2016, Crest raised the total payout by 40% to 27.6p. This year, it’s forecast to grow by another 23%, giving an easily covered forecast yield of 6.1%. There aren’t many stable companies in the market offering that kind of payout.

Buyer beware

As things stand, all of the above would be great choices for dividend-focused investors. Better still, if this income isn’t needed at the current time, choosing to reinvest these payouts back into the market could be an excellent, wealth-generating decision thanks to the beauty of returns compounding over time.

That said, nothing stays still in the markets and one does need to consider the possibility of increased volatility over the next few months as Theresa May comes closer to triggering Article 50. 

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Paul Summers owns shares in Conviviality. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.