Due to the tax-efficient nature of a Stocks and Shares ISA, I think they are the perfect investment wrappers for owning high-growth and income stocks. Any income or capital gains earned on investments held inside an ISA are tax-free.
With that in mind, here are three investments I would buy for my Stocks and Shares ISA today.
The first is a growth play. Bunzl (LSE: BNZL) is a FTSE 100 growth champion. Over the past decade, the distribution business has gone from strength to strength. As it has reinvested profits into acquisitions and organic growth, the company has achieved substantial sales economies. These have helped increase profit margins, which ultimately produces more profit for reinvestment.
If the company can maintain this strategy, I think it could be a great Stocks and Shares ISA investment, although its growth is not guaranteed. Indeed, Bunzl has relied heavily on debt in the past to fund deals. It may continue to do so, which could cause problems for the business if creditors start to pull back. At the same time, Bunzl needs a steady stream of deals to maintain its growth rate. If it can’t fund deals, growth could slow.
Even after considering these challenges, I’d buy the stock for my portfolio today.
Stocks and Shares ISA income
As an income investment, I would buy Legal & General (LSE: LGEN) for my ISA portfolio. At the time of writing, shares in this financial services giant offer a dividend yield of 6.5%.
I think Legal has brighter prospects as a dividend investment than some of its FTSE 100 peers due to the nature of the business. Life insurance and asset management is a long-term business. That means the company’s management has to take a long-term outlook when making business decisions, including the dividend. Put another way, I don’t think Legal will pay out more than it can afford, implying the dividend is here to stay.
That said, the company will always be exposed to events outside of its control, which could force management to cut the dividend. The pandemic and financial crisis are two examples. It’s impossible to tell when the next crisis will emerge. As such, the dividend shouldn’t be taken for granted.
Still, based on the stock’s current income potential, I’d buy the shares for my Stocks and Shares ISA today.
Income and growth
My final ISA pick is IG Group (LSE: IGG). I think this is both an income and growth investment. At the time of writing, shares in the financial services giant offer a dividend yield of 4.6%.
As well as this level of income, the organisation is also pursuing a growth strategy. It is investing more in its existing business and acquiring companies overseas. The goal is to grow IG’s international footprint, revenues and profits.
With cash on the balance sheet of nearly £500m at the end of its last reported period, I think it has plenty of funds to pursue deals and fund the dividend at the same time.
The main risk facing the business is the potential for more regulation, which could hurt sales and profit margins. A lousy acquisition may also lead to losses and weaken IG’s balance sheet, reducing its ability to sustain the dividend.
All in all, I would buy this company for my Stocks and Shares ISA considering its income and growth potential.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Bunzl. 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.