I’m a big fan of dividends, which are a reward for investing. As simple as that. Companies will pay out money to their shareholders, which can then be used to buy more shares. Then, as you own more shares and hopefully the dividend amount rises, an investor gets ever more dividend income. It’s a virtuous circle known as compound investing and it can help any investor increase the value of their portfolio.
With that in mind, I’m looking at two stocks that are generous to shareholders, providing what I believe is a good dividend income that will boost a Stocks and Shares ISA.
I’ve got the power
National Grid (LSE: NG) is a company I’ve admired for a long time. One attraction is it operates in stable parts of the world, mainly the UK and the USA. In my eyes this is a clear positive because it reduces the threat of plants being bombed or nationalised. Yes I know Jeremy Corbyn has said he’d nationalise the energy sector in the UK and that has weighed on the share price. But at the end of the day the checks and balances in the UK legal system, I think, make the prospect of shareholders being wiped out very unlikely. It’s a risk, but one that I can personally live with.
Other concerns holding back the share price are the prospect of rising interest rates and regulation. Both of these threats have been seen off by National Grid before and I don’t see them fundamentally affecting the investment case for this reliable business. Looking at Centrica and SSE and what has happened to their share prices (for those not in the loop they’ve both been plummeting for some time), then I think the rise in the share price in 2019 of around 7.5% for National Grid is quite good.
Admittedly, the £28bn behemoth isn’t exactly firing on all cylinders when it comes to growth, which may be a concern for some. But for investors focused more on income, the energy network does provide a 5.7% yield.
Keep on building
Housebuilder Crest Nicholson (LSE: CRST) offers a potentially very rewarding mix of a low P/E and a high dividend yield. The former is below seven and the latter is over 9%. These figures are very similar to those of another of the listed housebuilders, Persimmon. This suggests that investors are wary of the industry as a whole and this is why the share price is cheap, rather than the shares are being sold off because the company itself is performing poorly.
Crest Nicholson with its focus on Southern England is being hit harder by fears of a property price slowdown in that region. Taking a longer-term view, house prices as a result of the imbalance between supply and demand are likely to keep going up, meaning patient investors shouldn’t worry overly about short-term concerns such as this.
With its dividend having more than doubled between 2014 and 2018, I see the housebuilder as a prime candidate for investors seeking a dividend share to boost a Stocks and Shares ISA.
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Andy Ross owns shares in National Grid. 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.
Motley Fool UK 2019