The Motley Fool

Here are 2 dividend stocks yielding 7%+ that I’d buy today to help me become an ISA millionaire

Image source: Getty Images.

For almost every investor, making passive income is a benefit. The ability to earn money without having to lift a finger allows you to be more productive spending time doing other things. One way many try to achieve this is through buying stocks that pay out dividends. When the investments are housed within an ISA, the benefits of reinvesting the income from dividends, along with compounding, can help some to become an ISA millionaire.

For example, let’s say you invest £1,000 per month into stocks paying out 7% per year. Assuming the share price grows on average at 5% per year, then in 30 years you’d have reached ISA millionaire status. The process is sped up as you won’t be paying tax on the capital growth, or on the dividends that are reinvested. Of note, the first £1,000 you invest would be worth almost £30,000 at the end of the 30 years alone!

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

ISA millionaire dividend stocks

So now that we know it’s possible, which stocks should we buy to help us begin? The first one I like is Jupiter Fund Management (LSE: JUP). It sits within the FTSE 250, and is a financial services provider. More specifically, it’s the holding company for various investment funds (some of which you may be invested in yourself).

Jupiter acknowledges that investors buy into the listed company mostly for income. That is why the firm has a payout ratio of 50%. This means that half of the net profit is paid out as a dividend. This is quite high, but income investors won’t be complaining. Currently, the dividend yield sits at 7.2%. Although a special dividend for this year has been cancelled, the full-year dividend was paid last month. This bodes well for the normal mid-year dividend to continue to be paid.

High yield, high risk?

The second stock that I feel is worth evaluating is Airtel Africa (LSE: AAF). The dividend yield on the stock is 8.5%, making it one of the highest within the FTSE 250. The telecommunications firm recently celebrated its 10th birthday, although its tenure as a listed company has been far shorter. With operations mainly in Africa, some UK-based investors may be unsure whether they’d want to invest. The high dividend yield may be flagged as one factor hinting at its high risk.

Looking at the payout ratio as we did for Jupiter, we find that the Airtel ratio from last year was only 20%. I’d say that’s fairly conservative. So if the firm can deliver an 8.5% dividend yield by paying out only 20% of profits to investors, there’s a strong argument to be made that the dividend is sustainable. Even if the business sees a slowdown in profitability this year, it would only need to increase the payout ratio marginally to be able to maintain the nominal dividend per share figure.

For me, both Jupiter and Airtel merit an investment on the basis of the dividend yields. By putting both investments in an ISA shelter, and by investing regularly, it would put you well on your way to becoming an ISA millionaire.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Jonathan Smith and The Motley Fool UK have 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.