Investing in FTSE 100 shares could be a wiser move than saving money in a Cash ISA. The best interest rate on an easy-access Cash ISA right now is just 0.65%. As the current level of inflation is 0.7%, the real value of your savings is being nibbled away. Furthermore, interest rates aren’t forecast to increase significantly over the coming years.
As such, investing in higher-yielding FTSE 100 shares, in a Stocks and Shares ISA, could be a much better strategy. Sure, there’s always a risk of the capital value of a stock falling. But this risk can be reduced by investing across a diverse range of businesses.
With this in mind, here are two FTSE 100 stocks that pay generous dividends. These could help supercharge the return on your savings, and lead to impressive capital and income growth in the long run.
Should you invest £1,000 in National Grid right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if National Grid made the list?
One of the most reliable FTSE 100 shares
National Grid (LSE: NG) is the biggest utilities company listed on the London Stock Exchange. At a current share price of 935p, its market capitalisation is £33bn.
The group is a monopoly owner and operator of big chunks of the UK’s vital gas and electricity infrastructure. It also owns regulated assets in the north east of the USA. It’s a capital-intensive business, meaning it has to make substantial long-term investments. The reward for this is a regulatory framework that allows reasonable and reliable returns for shareholders.
National Grid paid a dividend of 48.57p per share for its last financial year. This was a rise of 2.8% on the previous year, in line with its policy of annual increases matching RPI inflation. At the current share price, the running yield is 5.2%.
I’d be happy to buy shares in this FTSE 100 utilities giant due to the generous yield. But also because of the nature of its business and record of reliable dividend increases.
Mining dividends
Precious metals miner Polymetal International (LSE: POLY) is among the world’s top 10 gold producers and top five silver producers. Its assets are in Russia and Kazakhstan. At a current share price of 1,690p, its market capitalisation is £8bn.
The company’s trailing 12-month dividends total $1.02 per share (65.3p at the conversion dates). Therefore, the running yield is 3.9%.
However, City analysts are expecting a big uplift ahead, in part due to the company’s recently revised dividend policy. A payout of $1.34 per share (101.5p at current exchange rates) is forecast for 2021. This produces a yield of 6% for buyers at the current share price.
I’d be happy to be one of those buyers. The company has a strong committment to providing shareholders with “superior sustainable dividends.” And I reckon the prospect of a 6% yield for starters is highly attractive.
FTSE 100 shares knock spots of cash!
In summary, and in my opinion, National Grid and Polymetal International are two strong picks for a portfolio of diversified FTSE 100 shares. There are currently a good number of blue-chip businesses with solid long-term growth potential and appealing dividend yields that knock spots off cash. Therefore, a portfolio of such stocks could produce impressive total returns in the coming years.
