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A FTSE 100 dividend stock and a small-cap growth stock I’ve just bought for my ISA

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In recent months, I’ve not bought many stocks within my ISA as I’ve been patiently waiting for another market pullback. That said, here’s a look at two stocks I did buy for my portfolio in June.

11%-yield dividend stock 

With the Imperial Brands (LSE: IMB) share price falling below £20 and its yield rising up to the 11% level, I couldn’t help but add a few more shares to my dividend portfolio. Normally, when a yield is that high, I’d run a mile.

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However in Imperial’s case, the dividend payout doesn’t look vulnerable to a cut in the near term, in my view. I don’t think management would have increased the interim payout by 10% in May if it was considering a dividend cut in the near future.

Of course, there are plenty of risks associated with IMB shares. Cigarette volumes continue to decline and regulators continue to make life difficult for the tobacco companies. Just last week, the city of San Francisco banned sales of e-cigarettes. A number of institutions are also dumping tobacco stocks, which is putting pressure on their share prices. Additionally, Imperial’s debt is higher than I’d like it to be.

However, with the stock trading on a P/E of under seven and offering a colossal yield, the value/contrarian investor in me couldn’t help but have another nibble here. I don’t think it’s game over for Imperial Brands just yet.

Super growth stock

At the other end of the spectrum, I also purchased a few shares in small-cap growth stock Keystone Law (LSE: KEYS) for my growth portfolio. The £165m market-cap company screened up on my high-quality small-cap growth screen and I think it looks very interesting, despite the fact it has a high valuation.

Keystone is a law firm that has a unique business model. It hires lawyers who then work from home or from their own offices while Keystone provides them with all the back office support they need.

The company currently has around 300 lawyers on its books but says its addressable market is potentially 47,000 lawyers, meaning there’s potential for significant growth. Clients include high-profile names such as Tesco, Siemens, and RBS, so the group is clearly doing something right.

There are a number of reasons Keystone shares appeal to me. First, I like the business model as it seems very scalable. Second, revenue and profits are rising rapidly. Over the last three years, revenue has increased by 105%, while net profit has surged nearly 600%. Third, cash flow appears to be strong and the stock is already paying a dividend. Fourth, return on equity (ROE) was 27% last year, which suggests that this is a very profitable business. Fifth, founder and CEO James Knight owns around 35% of the shares, meaning management’s interests are likely to be aligned with shareholders’ interests.

On the downside, the shares currently trade on a P/E of around 35, which is no doubt a high valuation and doesn’t leave much room for error. For this reason, I’ve only taken a small position to start with. I will look to boost my stake if the valuation comes down a little.

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Edward Sheldon owns shares in Imperial Brands and Keystone Law. The Motley Fool UK has recommended Imperial Brands. 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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