I like the occasional growth stock investment from time to time, and on that count I have some Sirius Minerals shares — not enough to be a big risk, but enough to make it interesting.
I also bought a few Premier Oil shares as a play on a recovering oil price, and they’re staring to tick up nicely.
But my core ISA strategy is to go for shares that I can tuck away for the next decade or so, very much in line with Warren Buffett’s approach of buying shares in companies that are so good you really can just buy and forget about them.
For me, that means dividend-paying blue-chip shares in FTSE 100 companies, and we’re currently enjoying the best time for top-quality dividend bargains that I’ve ever experienced in my investing career.
According to AJ Bell’s Dividend Dashboard, which provides us with a quarterly overview of the FTSE 100’s dividend outlook, we’re heading into record territory for dividends in 2019.
While 2018 has provided an overall dividend yield for the index of around 4.3% (itself way ahead of the Footsie’s long-term average), forecasts for 2019 suggest a jump to a massive 4.9%. In cash terms that’s an increase of 4% on last year’s total payments, which is nicely ahead of inflation.
But as well as providing an attractive return in its own right, such a high dividend yield also suggests to me that FTSE 100 share prices are too low — and with the horrible economic uncertainty we now face, that’s not really surprising.
So my ISA thoughts for 2019 are focused solely on the best dividend-paying stocks in our top index, with a hope for some capital growth too as what I see as a likely upwards correction takes place in the coming years.
Which specific stocks do I like the look of? My colleague Royston Wild has picked a few, and I really can’t fault any of his selections. Royal Dutch Shell is currently my favourite (and is at the top of my Buy list, just as soon as I get round to sorting out some pension fund transfers).
Taylor Wimpey‘s massive 10% yield surely reflects fears of a cyclical housing slump and a need to cut the dividends. But I’m not convinced that’s going to happen — and if it doesn’t, it could be one of the best cash cows out there today.
If I were just starting out with my first ISA in 2019, I’d go for a sector-balanced selection from those top FTSE 100 dividend yields, but there are a few others I’d consider that might not look so obvious.
One is Unilever, whose forecast yields of around 3.5% are nowhere near the biggest. But for a long-term investment, I see that level of income as attractive from one of the Footsie’s most solid and reliable companies, and I also see it as indicative of an undervalued share.
And though the 6.4% on offer from HSBC does look very attractive, I’d stick with Lloyds Banking Group and its more modest 5.3%, as I see the shares as significantly undervalued too.
But whichever individual shares you choose for your 2019 ISA, I reckon focusing on the FTSE 100 is likely to set you up well for the coming years.
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Alan Oscroft owns shares of Lloyds Banking Group, Premier Oil, and Sirius Minerals. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.