If you’re looking to invest £1,000 in a Stocks and Shares ISA today, there are thousands of companies and funds you can choose. The sheer volume of choice can be overwhelming for a beginner. So here I’m going to outline the two FTSE 100 dividend stocks I’d buy for an ISA right now, to help you decide where to invest your hard-earned money.
St James’s Place (LSE: STJ) is one of the largest and fastest-growing wealth managers in the UK. The company has more than £100bn in assets under management, and several thousand wealth advisors working for the group across the country.
There’s a steady stream of UK independent wealth managers and advisors who are giving up independent operations and moving to companies like these. These bigger businesses can handle the rising compliance demands and extra costs most wealth managers now have to comply with better than independent operators. This flow of advisors is bringing a steady stream of business to St James’s. The advisors usually bring their customers with them, who are then encouraged to invest in the group’s range of funds.
So far, this approach seems to be working exceptionally well. As St James’s has grown over the past 10 years, shares in the company have surged higher. Investors who bought the wealth manager 10 years ago have seen an annualised return of 21.2%, including dividends, on their money.
Its dividend growth has been particularly impressive. The firm’s payout to investors has grown at a compound annual rate of 25% for the past six years. The stock currently supports a dividend yield of 4.7%. As more and more people turn to St James’s to manage their money, I believe the trend of growing dividends and the rising share price will continue. This the perfect income stock for Stocks and Shares ISA, in my mind.
I’m also positive on the outlook for corrugated packaging producer DS Smith (LSE: SMDS). Just as I believe the steady flow of wealth managers moving to St James’s will continue to drive the group’s growth, I reckon the booming demand for e-commerce will continue to drive growth at DS.
As e-commerce has boomed over the past five years, the demand for packaging has also exploded. Its is just one of the handful of companies that have been able to profit from this trend. If City analysts’ forecasts are to be believed, the firm will earn a net profit of £475m in its current financial year, up nearly 200% in six years. On top of organic growth, DS has completed a steady stream of acquisitions over the past few years. These deals have helped the group reinforce its position in some markets, while it expands into others.
The net result of this organic and bolt-on expansion is that DS’s earnings per share have grown at a compound annual rate of 13% since 2013, while the dividend per share has risen at 12%. Right now, the stock trades at a discount forward P/E of 10.5 and yields 4.5%. I think this is a bargain price to pay for this packaging business that doesn’t look as if it will slowing down anytime soon.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended DS Smith. 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.