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Have £1000 to invest? Here are 2 dividend shares I’d buy for an ISA today

If you only have a relatively small amount of money to invest in an ISA then you don’t want to buy too many shares, because the dealing costs will eat up too much of your hard-earned cash. Instead, I’d suggest focusing your investments and I think these two companies from the elite FTSE 100 would be ideal.

Stamping out tobacco – or not

First up is big dividend-paying cigarette producer British American Tobacco (LSE: BATS). Despite not being a fan of smoking and despite the long-publicised decline of smoking in the western world, from an investment standpoint, BATS still looks to be a worthy holding.

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The reason is mainly the dividend. The current yield is 6.7% and dividends from BATS are paid quarterly, giving more opportunity to either take the payments as income or better still for growing an ISA, reinvesting in more shares. The dividend is easily covered by earnings so I don’t think it’s in imminent danger of a cut, and I feel management at BATS will be keen to keep investors on-side with a growing dividend. 

Look for growth

Growth in emerging markets is also another BATS opportunity, as are e-cigarettes and similar innovations, referred to as next-generation products. Earlier this month, the company had good news for investors on this front with half-year results showing revenue growth from its ‘new categories’ division, which includes vaping, rising by 27% to £531m with faster growth expected in the second half.

Overall, the tobacco giant looks far from being in a steady decline, despite the many challenges the tobacco industry faces as many countries clamp down on smoking. I believe it offers a hard-to-beat income right now alongside the prospect of growth in the future from new products. This makes it investable in my view. 

Ready for change

My second suggestion is another one that may not be everyone’s cup of tea as it’s an oil major. Nonetheless, again looking at the investment case, I believe BP (LSE: BP) could be financially rewarding for many years to come. Similarly to BATS, it faces a sort of existential crisis as its main business sees wholesale change, this time in the form of electric cars, but I expect it has the ability to adapt and continue to prosper.

The fear around the future of the business model is what I think makes it such a high-yielding share and therefore in my opinion ideal for an ISA investment. The shares yield 6.2% and looking at the P/E of under 13, are not that expensive either.

New energy

When it comes to phasing out oil – which isn’t imminent but is a prospect still on many investors’ radars – BP has a plan. It’s not going to be taken by surprise by the trend towards greener energy so it has plenty of time to adapt and invest in producing cleaner forms of energy. The energy giant has, for example, been investing in renewables, focusing on biofuels, biopower, wind energy and solar energy. 

Indeed, the change is an opportunity for BP because global demand for energy isn’t reducing, we just all want it with less environmental damage. Longer term, given BP’s expertise and cash to invest in new energy projects, this could be an opportunity and it’s something the firm and its competitors are getting ready for.

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Andy Ross 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.