There are only a few days left to use of the last of your old ISA allowance, so you’d better get moving if you don’t want to waste it.
And if it’s already used, you’ll have a whole new allowance (which will rise to £15,000 in July) for 2014-15, so which companies should you consider? Well, for me, the best use of an ISA is for stashing away investments for the very long term — until retirement, for example.
So here are five that I think should stand the test of time, showing some basic measures together with historic 10-year price appreciation:
Should you invest £1,000 in Diageo right now?
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| Company | Price | P/E | Divi | 10-year |
|---|---|---|---|---|
| Aviva | 490p | 10.1 | 3.5% | -16% |
| Barclays | 246p | 8.7 | 4.0% | -48% |
| National Grid |
822p | 15.7 | 5.1% | +77% |
| Rio Tinto | 3,336p | 9.9 | 3.7% | +190% |
| Royal Dutch Shell | 2,334p | 11.2 | 4.9% | +83% |
P/E and Dividend yields are forecasts for next year-end.
Aviva
Insurance really is a long-term business, and though it can be erratic over the short term, it has a habit of coming out ahead over the decades. Aviva (LSE: AV) had to slash its dividend in 2012 — it had paid an overstretched 8.6% the previous year. But even after that, a forecast yield of 3.5% is better than average, and Aviva’s future growth prospects are looking good.
The share price is down over 10 years, but that did include the credit crunch and recession, and there were good dividends to compensate. With a forward P/E of 10.1 (dropping to 9.3 for 2015), the shares look oversold and a good long-term bet.
Barclays
Barclays (LSE: BARC) has been through the wars, and is today looking the least risky of the five FTSE 100 banks — and the sector is surely emerging into a new light after the dark years. Barclays’ liquidity ratios are looking strong now, good dividends are expected (4% this year, 5.6% next), and with a forward P/E of under 9 the shares are just too cheap.
And Barclays doesn’t have the same risky exposure to an overheating China that is worrying shareholders of HSBC and Standard Chartered now.
National Grid
The utilities companies pay some of the steadiest dividends in the market, and as the provider of distribution infrastructure in the UK, National Grid (LSE: NG) is at lower pricing risk than some in the government’s eye — in fact, while some utilities share prices have fallen over the past 12 months, National Grid is up 5%.
Those 5% dividend yields look very attractive to me.
Rio Tinto
Rio Tinto (LSE: RIO) is in a depressed sector, but one which is recovering — in fact, Rio set new production records for iron ore, bauxite and thermal coal in 2013, despite the alleged slowdown in demand from China (which is still growing its economy at 7.5% per year). Over the long term, Rio Tinto’s earthly delights will be in great demand, of that there is really no doubt. And if you can get in when the sector is in a cyclical downswing (a P/E of under 10 is a steal), so much the better.
Royal Dutch Shell
You just have to have an oil & gas supplier, don’t you? Over the next 20-30 years, demand is going to be very strong and the profits will be handsome. Why Royal Dutch Shell (LSE: RDSB)? To be honest, I think either Shell or BP would be just fine, but BP still has a bit more recovery needed before it gets back to earnings growth — though over 20 years, well, take your pick.
