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Got £2,000 for a Stocks and Shares ISA? I’d buy Aviva’s 8%+ yield and the National Grid share price

Are you looking for two top income and growth stocks for your Stocks and Shares ISA? These two FTSE 100 dividend heroes could be the perfect place to start.

Massive yield

Insurance giant Aviva (LSE: AV) and energy transmission and distribution giant National Grid (LSE: NG) are both household name companies with strong track records of paying handsome dividends to investors.

If you want a whacking income, you might find Aviva particularly tempting. It currently offers a forecast yield of 8.1%, which absolutely thrashes the 0.88% you get from the average Cash ISA. In fact, it pays more than nine times the income.

Well covered

Some investors are instinctively wary when they see such a high dividend. It can be a sign of a company in trouble, and the payout is often imperilled. Yet Aviva’s dividend is covered 1.9 times by earnings, and that looks enduring. In 2020, City analysts reckon the group’s earnings per share (EPS) will be 64.47p, yet the dividend per share will stand at 34.5p, giving cover of 1.87. Management is now aiming for consistent, sustainable dividend growth, and the yield is forecast to climb to 8.4% by 2020.

Forecasts aren’t guarantees, but they do suggest that Aviva is on the right track.

Its share price has disappointed though, falling 20% in the last year. This is not a blip, the stock trades 16% lower than five years ago. This partly explains the high yield, which is calculated by dividing income by the share price. What this does mean is that the Aviva share price looks cheap right now, trading at a forecast valuation of just 6.8 times earnings.

Time to buy

That looks very tempting with the group on course to boost EPS by a whopping 63% this year, with earnings growth steadying at 4% in 2020. This could be a good time to take a long-term position in the stock. Wait patiently for the share price to grow and let those dividends roll up.

My colleague Roland Head sums up this stock perfectly: Aviva has a problem. It’s profitable, healthy and pays generous dividends, with slow growth the main downside. I reckon that today’s low valuation and high yield nonetheless make it an unmissable opportunity.

On Grid

After a few tough years, National Grid’s share price appears to be on the mend, rising 15% in the past 12 months. It doesn’t quite match Aviva’s bargain status as it currently trades at around 15 times earnings, which is pretty much fair value.

Its dividend yield isn’t as generous either, although at a forecast 5.3%, it is comfortably above the FTSE 100 average of 4.5%. It is covered 1.2 times. Its consistent, heavily regulated income streams mean that National Grid probably doesn’t need super-thick cover to maintain confidence.

Steady as she goes

Nobody buys National Grid in the hope of generating explosive share price growth. This is an income stock through and through. EPS growth forecasts looks steady though, at 3% in the year to 30 March 2020, and 7% the year after. By 2021, the yield is forecast to have climbed to an electric 5.7%, with cover holding firm at 1.25.

Royston Wild says he would buy and hold National Grid for the next 10 years. Its dividend income looks fairly secure despite the need to invest in infrastructure and comply with strict regulatory demands. And that’s all you want from this stock.

Five Income Stocks For Retirement

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.