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5 days to ISA deadline. Three dividend stocks I’d buy

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There are only five days left until this year’s ISA deadline on 5 April. If you haven’t used up your £20k tax-free allowance yet, there’s not much time left.

To help you get started, here are three dividend stocks I’d be happy to buy for my Stocks and Shares ISA today.

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Defensive dividends

FTSE 100 defence giant BAE Systems (LSE: BA) has fallen out of favour recently. Investors are worried that aircraft sales to Saudi Arabia could be disrupted by export restrictions on parts made in Germany.

I’m not too concerned. This kind of problem is business-as-usual for BAE, which has faced similar issues many times in its long history. Indeed, despite various problems over the years, BAE’s dividend hasn’t been cut since 1999.

For me, such a long dividend history is a powerful buy signal. Another thing I like about this business is that the group’s order backlog rose by 25% to £48.4m last year, securing future revenue.

With the shares trading on just 10 times 2019 forecast earnings and offering a yield of 5%, I reckon BAE looks like a decent buy.

A high-flying bargain?

Another stock I’ve been watching with interest is British Airways owner International Consolidated Airlines Group (LSE: IAG). Shares in the firm — which also owns Aer Lingus and Iberia — have fallen by about 25% over the last six months.

One reason for this is Brexit. Depending on the terms of our departure from the European Union, UK airlines wanting to fly within the region may need to ensure that at least 50% of their shares are owned by EU nationals. If UK shareholders are no longer included, then IAG is expected to breach this limit.

Chief executive Willie Walsh hasn’t yet revealed a clear plan to solve this problem, causing some concern. However, airlines would have six months to comply with this rule, post Brexit. I suspect a solution will be found.

Perhaps a bigger worry is that IAG’s profits are expected to be flat this year, as rising costs put pressure on margins. A sector downturn is a risk. But with the shares trading on just five times forecast earnings and offering a 5.5% yield, I think the shares are cheap enough to be worth the risk.

Earn 6.6% from this household name

Another sector of the market that’s out of favour at the moment is insurance. One reason for this is that tough competition in motor and home insurance is limiting growth. However, most companies seem to be performing fairly well, despite this pressure.

Motor and home insurer Hastings Group (LSE: HSTG) is a good example of this. The number of customer policies climbed 2.5% to 2.7m last year, while gross written premiums — cash collected — rose by 3% to 958.3m.

The group’s return on equity — a key measure of profit for financial firms — was stable at about 21%. This helped to support a 4% increase in adjusted operating profit, which rose to £190.6m.

Hastings’ full-year dividend rose by 7% to 13.5p per share last year, giving a yield of 6.3%. City analysts expect a similar increase this year, giving the stock a forecast yield of 6.6%. I’d rate this as a buy for income.

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Roland Head 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.

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