Stocks and Shares ISAs are wonderful things. They enable investors to contribute up to £20,000 per year, invested in UK shares, while keeping any returns made free of tax. Main broker platforms offer Stocks and Shares ISAs, and they are easy to open.
Opening the account, however, is the simple part. Deciding which shares to purchase is a more nuanced decision. This could put first-time investors off. Only 3.3% of the UK population were subscribed to a Stocks and Shares ISA in 2019. However, if you are one of the investors just dipping a toe into the water of UK shares, I recommend looking ahead.
UK shares options
I think it’s best to examine potential investments with long-term success in mind. For me, this means finding companies with good track records of decision-making, and whose future prospects are sound. These may be mature companies, and so are not necessarily primed for explosive growth, but that can generate solid returns over many years.
Companies with this characteristic often operate in markets with high barriers to entry. This discourages new firms from providing competition. An example in UK shares would be Reckitt Benckiser (LSE: RB). A household goods supplier that may not necessarily be a household name. But readers will recognise brands like Dettol, Calgon, Durex, and Nurofen. Strong, trusted brands are a bedrock of long-term success.
Reckitt Benckiser 2020 perfomance
As a hygiene product supplier, Reckitt has enjoyed a strong 2020 performance. Indeed, compared to 2019, sales have increased over 9% during the first three quarters. From the March lows seen across all UK shares, the RB share price rebounded strongly.
The share price has seen a recent fallback, however. This has possibly been driven by succesful vaccine developments. As the pandemic unwinds, logic dictates that demand for cleaning products may fall. But growth among health products and in developing markets leaves Reckitt well primed for future growth. And a reasonable dividend yield of around 2.6% will support capital growth if reinvested through a Stocks and Shares ISA.
Diageo — another strong UK share
Over the upcoming Christmas period, readers may enjoy a stiff drink after the trials of 2020. Fancy a pint of Guinness? Or a small dram of Johnnie Walker whisky? Both are manufactured by Diageo (LSE: DGE), among many other well known brands. Ben Race recently examined the investment case for Diageo.
The closing of pubs and restaurants has impacted demand, with net sales to June 2020 down by 8.7%. Remember though, investments in Stocks and Shares ISA are for the long-term. Diageo’s guidance is to expect an advance in operating profit through to June 2021.
Traditionally, Diageo has seen predictable sales and cash flows, allowing a sustainable dividend of around 2.5%. This has increased steadily over the past five years, with good dividend cover in place. Diageo’s defensive qualities have seen it weather the pandemic, and it is well placed to grow in a post Covid-19 world.
UK shares final thoughts
I think Reckitt Benckiser and Diageo would make two great long-term components of a balanced portfolio with a growth outlook. This is how I go about finding investments for my own Stocks and Shares ISA. By applying the same kind of thinking, Foolish readers can identify UK shares investment candidates for their own Stocks and Shares ISAs.
bwatson1 has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. 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.