Have £10k to invest? I’d ditch a Cash ISA and buy these 2 FTSE 100 shares right now

I think these two FTSE 100 (INDEXFTSE:UKX) dividend shares could offer an impressive passive income.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Investing in a Cash ISA could be an unwise move. After all, interest rates are close to historic lows and aren’t expected to increase significantly over the coming years.

As such, investing in higher-yielding FTSE 100 shares could be a much better idea. Certainly, there’s a risk of capital loss. But through diversifying among a range of companies, this risk can be reduced.

With that in mind, here are two FTSE 100 stocks currently offering high income returns that could turbocharge your savings. They could be worth buying today within a tax-efficient account such as a Stocks and Shares ISA.

Severn Trent

The prospects for utility companies such as Severn Trent (LSE: SVT) have been uncertain in recent years. They’ve faced significant regulatory and political risks that have contributed to weak investor sentiment. This trend may well continue to some degree in the short run, although the company’s valuation suggests that it may offer a margin of safety.

For example, Severn Trent currently yields 4.3%. This is roughly in line with the FTSE 100’s yield, although the water services company has historically offered dependable dividend growth which has been above inflation.

Looking ahead, uncertainty for the global economy could make the company more attractive to increasingly risk-averse investors. Its recent updates have shown it’s making progress with its strategy, while a general election result that removes the threat of nationalisation could produce improving investor sentiment towards the wider sector over the medium term. As such, from a risk/reward perspective, the stock could offer income investing potential at the present time.

Standard Life Aberdeen

Standard Life Aberdeen’s (LSE: SLA) recent half-year results showed that it’s progressing with a dynamic growth strategy. In the period, it has strengthened its market position with the launch of 16 new funds. Meanwhile, acquisitions in the UK have improved its growth opportunities in the wealth advice segment.

In addition, it was able to retain Lloyds as a key client. Standard Life Aberdeen’s assets under management increased by 5%, which highlights that while its share price has been changeable, its financial and operational performance has improved.

The company’s dividend yield of 6.9% is around 2.4 percentage points higher than that of the FTSE 100. This may make it attractive to a wide range of income investors, although it’s currently facing risks such as a global trade war which could dampen investor enthusiasm towards the sector and impact negatively on its share price performance in the short run. Therefore, the stock may lack dividend reliability relative to some of its top index peers.

However, with it having a high yield and its results showing it now appears to have a solid strategy that’s being successfully implemented, it could produce impressive total returns in the coming years.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Lloyds Banking Group and Standard Life Aberdeen. The Motley Fool UK has recommended Lloyds Banking Group. 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.

More on Investing Articles

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Is this the best chance to buy cheap FTSE 100 shares in a generation?

I want to buy shares when they're cheap, and sell... never, just keep taking the dividends. And the FTSE 100…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Could NatWest shares be 2024’s number one buy for passive income?

For those of us looking to earn some long-term passive income, how does NatWest's 7% dividend yield sound? It sounds…

Read more »

Investing Articles

£12K in savings? Here’s how I could turn that into £13K annual passive income

This Fool explains how investing a lump sum can help her build a passive income stream to enjoy in her…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s why Rolls-Royce shares are now set to fly over the £4 mark

Once again, Rolls-Royce shares are crushing the FTSE 100. Should I add to my holding of this stock at the…

Read more »

Investing Articles

1 under the radar FTSE 100 AI stock investors should consider buying

Our writer explains why this FTSE 100 pick could be a shrewd investment with its established experience of using AI…

Read more »

Investing Articles

Does the beaten-down Diageo share price make it a no-brainer buy?

Harvey Jones spent years waiting for the Diageo share price to look like good value, before finally buying it in…

Read more »