Now that we’ve moved into a new tax year, I’ve been searching for fresh investments to add to my Stocks and Shares ISA. I’ve been looking for companies that can offer a blend of income and growth due to a Stocks and Shares ISA’s tax-efficient nature.
Any income or capital gains earned on assets held inside one of these wrappers doesn’t attract tax. Investors don’t even need to declare the income on their tax return. So, with that in mind, here are five investments I would buy for my ISA portfolio today.
Stocks and Shares ISA buys
The first company on my list is the financial services group IG. I like this business because it offers investors an attractive dividend yield of 4.7%, at the time of writing.
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What’s more, over the past five years, the company has carved out an impressive growth track record. Earnings have grown at a compound annual rate of 13% since 2015. Of course, there’s no guarantee earnings will continue to grow at this pace.
The business is also exposed to risks unique to the financial sector. Challenges such as regulation, costs and competition, could all impact profit growth (and the dividend) in the years ahead. Despite these challenges, I’d buy the stock for its income and growth potential for my Stocks and Shares ISA today.
As well as IG, I’d also buy NatWest Group. This recovery play might not be suitable for all investors. Nevertheless, I think the outlook for the stock is bright as it recovers from the setbacks in 2020. It faces similar challenges to IG, costs, regulations and low interest rates, so it’s not without its challenges. Still, I think it has tremendous recovery potential.
Income and growth
Elsewhere, I’d buy Airtel Africa and 3I Infrastructure. Infrastructure investments can be excellent income investments. At the time of writing, these companies support dividend yields of 3.2% and 6.6% respectively.
These levels of income look attractive, but the companies aren’t without their risks. Both have elevated levels of debt, which could become an issue if an inflationary environment leads to rapid interest rate increases over the next few years. Even after taking this significant risk into account, I think these businesses could be good additions to my Stocks and Shares ISA as dividend growth stocks.
Finally, I’d buy defence contractor BAE Systems for my Stocks and Shares ISA right now. With a dividend yield of nearly 4%, this stock is an income champion. The dividend is backed by revenues from multi-year defence contracts, which is an incredibly stable source of income. The company is also investing billions in research and development, which should help underpin earnings growth in future.
That said, the weapons industry is one of the most controversial for investors. As such, this company might not be suitable for all. Competition, regulatory challenges and legal headwinds could all jeopardise BAE’s future.
