Have £2,000 in your ISA? Here are 2 dividend stocks I’d consider

Andy Ross looks at two shares that he thinks could provide superior income potential within a Stocks and Shares ISA.

| 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.

If you have cash sitting in your Stocks and Shares ISA, I’d recommend buying a company with dividends – that way you can earn income for owning a small part of that company. On top of that, over time the share price is likely to rise as well, giving you the double benefit of income from dividends and growth.

Bounce-back opportunity

AG Barr (LSE: BAG) – the maker of Irn-Bru – is one such dividend-paying company. It doesn’t have the biggest dividend on the FTSE 250, but that’s kind of the point. What it does have is potential to grow the dividend year-on-year, rather than have to cut a dividend that has become too burdensome, like Royal Mail and SSE have had to do.

The yield is 2.8% based on the current share price, however, earnings covered the payout by 2x. It’s therefore highly unlikely that the dividend is in danger of being cut, even if the company’s last update to the market wasn’t the most positive. What that does mean though is that the share price is at its lowest for two years, which pushed down the P/E ratio so the shares are seen as better value.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

The fall came about because the company revealed a profit warning. It said that the sugar levy and poor weather meant volumes were lower. As a result, it now expects revenue for the 26 weeks to 27 July to have dropped around 10% from the previous year to £123m, with profit for the full year expected to decline by as much as 20% on the year.

Overall though, I still rate the shares a buy. The beverages company owns strong brands, especially Irn-Bru, it’s family-run, which means shareholders are usually looked after better, and its products are sold globally to repeat customers. I think this is a good recipe for ongoing success, despite the recent blips.

The solid builder

Housebuilder Barratt Developments (LSE: BDEV) complements the beverage company well. It’s a more natural choice for those chasing high yields. It has a dividend yield of 4.2% and it’s cheap as well with a P/E below nine.

That’s because, like all its peers, it’s being hit by investor fears around housebuilding generally as a result of Brexit/economic concerns and the less favourable buy-to-let environment. 

Recent results were a mixed picture, showing a number of positives but also some issues that may be problematic if they continue. The firm, in its full-year results, revealed it had sold 17,856 homes, which pushed up operating profit to £901.1m. Margins also improved significantly from 17.7% to 18.9% because of higher-margin land purchasing, as well as the continued focus on more efficient house types.

The downside was that revenue fell slightly as did average selling prices. If that continues it’ll be a concern, but for now, there’s no reason to think it will. It’s a reflection of the group focusing less on London. Overall, I think the company is in good shape and could be a great way to get income from dividends.

This AI stock is attracting investors like Michael Bloomberg and Peter Thiel…

Why are these legendary investors, already wealthy beyond imagination, drawn to this opportunity? The allure lies in more than just potential returns; it's a vote of confidence in a company poised for long-term success.

Imagine a revolutionary AI company that's not just participating in the digital media landscape but reshaping it entirely.

Trusted by giants like Amazon, Disney, and Netflix, the company reported nearly £637 million in revenue last year, marking a robust 7.8% growth over three years. Its impressive market reach and spirit of innovation are just the beginning of its story.

Best of all, we’re thrilled to offer you an exclusive glimpse into this game-changing AI investment, absolutely free.

Get your free AI stock pick

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.

Andy Ross has no position in any of the shares mentioned. The Motley Fool UK has 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.

More on Investing Articles

Young black colleagues high-fiving each other at work
Investing Articles

£10,000 invested in Unilever shares 12 months ago is now worth…

After years of inertia, Unilever shares have come to life over the last 12 months. And the FTSE 100 company…

Read more »

Investing Articles

Is it finally time for me to buy this FTSE 100 stock?

Stephen Wright has watched 3i outperform the rest of the FTSE 100 for what feels like forever. Is it finally…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

Want to start buying shares with under £1,000? 3 things to figure out first

Christopher Ruane considers a trio of points he thinks a new investor on a limited budget could helpfully consider before…

Read more »

Buffett at the BRK AGM
Investing Articles

5 great lessons from the latest Warren Buffett letter

Christopher Ruane has been poring over the latest shareholder letter from investor Warren Buffett. Here's a handful of stock market…

Read more »

Investing Articles

The dirt cheap easyJet share price is staring me in the face

When Harvey Jones looks at the easyJet share price, he sees a brilliant buying opportunity staring right back at him.…

Read more »

British Pennies on a Pound Note
Investing Articles

This share helps me earn a second income — and it sells for pennies

Christopher Ruane looks at some pros and cons of one share he owns primarily for its potential to help boost…

Read more »

Investing Articles

Is it game over for JD Sports shares?

Harvey Jones has taken an absolute whipping at the hands of JD Sports shares. Should he accept defeat or pin…

Read more »

Close-up of British bank notes
Investing Articles

With a spare £9K, here’s how a Stocks and Shares ISA could earn £1K+ annually in dividends

Taking a long-term approach and finding high-quality shares to buy can help unlock the passive income potential of a Stocks…

Read more »