Seven top shares to consider for your ISA

Published by Helen Pridham on 09 February 2011.
Last updated on 09 February 2011


This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Companies with high dividend yields tend to be mature, well-established companies with reliable cashflows. Henk Potts, equity strategist at Barclays Wealth, says: "The corporate picture is very bright at present."

He expects the cost cutting measures that many businesses have undertaken over the past two years will lead to a strong bounce-back in corporate profitability.

Expert recommendations

For Potts, a key buy for income investors would be Vodafone, which has been yielding nearly 6%. He expects the company to deliver strong performance in 2011, with continued improvement in its core markets and higher growth from emerging markets, which will result in "decent earnings growth".

He points out that there is also the likelihood of a dividend coming out of its subsidiary Verizon Wireless at last, which would boost its current cashflow forecast.
Two other income-yielding shares favoured by Potts are National Grid and Shell, although he says that Shell is more risky than his other two recommendations. One reason he likes the oil giant is due to its accelerating disposal programme.

Vodafone and National Grid are also among the recommendations put forward by Thomas Malloch, investment manager at stockbroker Redmayne Bentley. He says: "We certainly believe equities are an attractive source of income for investors and we expect to see dividends from FTSE 100 companies increasing in 2011."
He says National Grid has had a strong year and as a utility responsible for the transmission of electricity and gas in the UK and parts of the US, it is a good defensive choice for investors.
In the insurance sector, Malloch likes Aviva and RSA Insurance, which both have yields of more than 6%. He believes Aviva's cost cutting and restructuring, as well as good cashflow, are favourable indicators for increasing dividend growth next year.

Several of these share choices are also echoed by Graham Spooner, investment adviser at The Share Centre. He also highlights GlaxoSmithKline for those who want a more low-risk choice.

He explains: "The company has a lot more to it than meets the eye. It has a newish management that has been doing well in revitalising it and expanding its operations in the emerging markets.

"It has a good pipeline of new drugs and other products coming onto the market, as well as old favourites, such as Lucozade, Panadol, and NiQuitin for those trying to give up smoking.

"It is steady and dull but these attributes are likely to appeal to many income seekers."

Spooner says another attractive but somewhat higher-risk choice for income seekers is Chesnara, a life insurance underwriter based in Lancashire. "Formerly known as Countrywide Assurance," he says, "the company changed its name after acquiring a Scandinavian company.

"It underwrites life, disability and health insurance, but the main interest for investors is that it has a yield of more than 6% and plenty of spare cash."

This article was written for Money Observer, Moneywise's sister publication in February 2011

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