On March 12, the FTSE 100 index suffered its worst day since Black Monday in 1987. As it plunged 11%, there was little retail investors could do. Even the dividend darlings of many portfolios suffered badly.
But there is a silver lining to this market sell-off. As share prices decline, stocks boast higher dividends on a percentage basis.
Dividend stocks and the ISA deadline
Now is the time to start getting your shopping list ready. After all, if you liked a company for robust fundamental reasons and dividends in February, you should really like it even more when its share price is on sale now, especially if you buy it via an ISA that has tax advantages.
First a quick reminder that as our tax year runs from 6 April to 5 April, the deadline for individuals to contribute to the previous year’s ISA is April 5.
When markets react negatively this fast, it’s impossible to stop your portfolio and ISA value falling completely. And that is understandably unnerving both emotionally and financially. But holding your nerve will pay off in the long term.
You have until April 5 to use your £20,000 ISA allowance for this tax year. So here are two companies to consider when you decide what to buy for your Stocks and Shares ISA.
Legal & General
I like the favourable metrics offered by Legal & General (LSE: LGEN). As I write, year-to-date (YTD) the insurance and investment giant is down about 30%. The stock is now hovering around 185p and offering a dividend yield of 9.9%. In early March, it increased the dividend by 7% – its 10th consecutive increase. And the shares are going ex-dividend on 23 April.
The group has recently reported robust full-year results. It achieved a 12% rise in year-on-year operating profit which hit £2.1bn. Earnings per share climbed 16%. And the biggest increase to underlying earnings came from the institutional retirement division. Management is increasingly focusing on asset management and providing retirement solutions. LGEN is both profitable and cash generative.
With a forward P/E of about 5.4 and P/B ratio of 1.2, I regard it as one of the best UK stocks for passive income.
Lloyds Banking Group
Shares of Lloyds Banking Group (LSE: LLOY) are trading around 37p each and are down about 33% YTD. The forward P/E and P/B stand at 6.2 and 0.6 respectively.
Lloyds shares have a dividend yield of 9.1%, which easily beats the long-term FTSE 100 average of 4.5%. From 2020 onward, the banking giant will pay dividends quarterly. Thus following the ex-dividend date expected on 16 April for the final annual dividend payment, the shares will once again go ex-dividend on 21 May for the first quarterly one. Afterwards, the next ex-dividend date is expected on 20 August.
Many of our readers will remember how far bank has come since the dark days of the 2008/09 financial crisis. Profits have risen and it has the largest UK presence of its high street peers.
Analysts are not fully sure as to the coronavirus’s economic effects. However, as Citigroup CEO Michael Corbat recently stated, this is not a turmoil stemming from the financial sector.
There will still likely be volatility in the LLOY share price. Yet I believe management will take steps to keep the bank competitive amid the current uncertainty. And the stock will offer value for shareholders in the months ahead.
It’s ugly out there…
The threat posed by the coronavirus outbreak has spooked global markets, sending stock prices reeling.
And with the Covid-19 virus now beginning to spread beyond of China and Italy, it seems very likely that the bull market we’ve enjoyed over the past decade could finally be coming to an end.
Against such a backdrop of market worry, it’s little wonder that many investors are starting to panic. (After all, nobody likes to see the value of their portfolio fall significantly in such a short space of time.)
Fortunately, The Motley Fool is here to help, and you don’t have to face this alone…
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tezcang has no position in any of the shares mentioned. 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.