Have £5k to invest in your ISA? A FTSE 100 dividend stock I’d buy today and hold for 10 years

Could this FTSE 100 (INDEXFTSE: UKX) faller be the key to stunning returns now and in the future? Royston Wild explains why his answer is yes.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Market conditions might be challenging right now but that’s no excuse to dig yourself a foxhole and sit tight until the bloodshed is over. Failing to capitalise on dips in the market is a classic investment mistake. Indeed, following the recent sell-off across global stock bourses, there’s an enormous list of great stocks waiting to be gobbled up.

Take Hargreaves Lansdown (LSE: HL), a FTSE 100 share whose extreme share price fall over the past week leaves it a whisker away from hitting new five-month lows. And this makes it a great share to stash into your Stocks and Shares ISA.

Despite this heavy selling activity the financial services giant still trades on a tall forward P/E ratio of 31.3 times. This is twice the level which the broader FTSE 100 average sits at, and some would argue leaves it vulnerable to more weakness in the days and weeks ahead.

I would argue this multiple is quite reasonable given Hargreaves’ considerable structural opportunities, ones which latest financials released last week illustrated perfectly. These showed customer numbers rocketed by an extra 133,000 in the year to June, a rise which helped assets under administration surge 8% to £99.3bn.

And, as a consequence, profits at the business rose an extra 5% in fiscal 2019 to £306m. It’s unlikely this trend will run out of steam any time soon.

Dividends have doubled!

Driven by fears over the pathetically-low State Pension, Britons are taking active control of their finances like never before and this is playing into the hands of Hargreaves as the UK’s largest direct-to-consumer investment specialist. 

Its bright earnings outlook should continue to be a boost for income investors. Ordinary dividends at Hargreaves have more than doubled during the past half a decade and more electrifying payout hikes could be just around the corner. Indeed, City analysts predict last year’s 42p per share reward will rise to 45.8p in the current period, a projection which yields an inflation-beating 2.5%.

There might be bigger yields out there, sure, but forget about this low-ish reading. The beauty of progressive payouts is the possibility of chubby yields further down the line and I reckon this particular blue-chip should deliver some terrific dividend cheques over the long term.

Fancy a 6% dividend yield?

If I can borrow your ear for a little longer, I’d love to talk for a minute about Bakkavor Group (LSE: BAKK), a stock which has lost more than a 10th of its value so far in August. These recent falls leave it trading on a forward P/E ratio of just 6.9 times and makes it another terrifically-priced dividend share to buy today.

The FTSE 250 firm may be experiencing tough conditions in the UK right now, but strong growth in the US and China (where like-for-like sales boomed 16% in 2018) is helping it to offset the worst of these problems. And the fresh food manufacturer is investing heavily to boost factory capacity in these regions to meet bulging demand now and in the future, and particularly so in fast-growing segments like the ‘food-to-go’ market.

So invest in Bakkavor today for titanic long-term returns, I say. And, in the meantime, a bulging 6.3% forward dividend yield helps to take the edge off a likely, and rare, annual profits dip for 2019.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »