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Forget a Cash ISA! Here are 2 dividend shares I’d buy in March instead

Mature friends at a dinner party
Image source: Getty Images

For easy-access Cash ISA accounts, I can almost get 3% interest. This guaranteed amount rises closer to 4% if I’m willing to tie my money up for a year or more. These rates are attractive, yet I still prefer to invest in dividend shares I believe could offer me a higher yield, without having to take on a lot more risk. Here are two examples I’m likely to buy in the coming weeks.

Banking on receiving cash

The first business is Close Brothers Group (LSE:CBG). The UK bank sits in the FTSE 250 and doesn’t quite get the same limelight as its FTSE 100 banking peers. Admittedly, it’s a smaller overall outfit, but it follows the same business model as other banks.

One reason why I’m favouring Close Brothers for my dividend portfolio over other banks is the generous dividend yield. It currently sits at 6.72%, putting it in the top percentile of income stocks in the index.

Ahead of half-year results released next month, I feel there’s plenty to be positive about. A trading update late last year spoke of growth in the asset management arm. Year-to-date net inflows were up 7% versus last year, even in a difficult environment. It has also mentioned that the “year-to-date net interest margin remained strong”. This refers to the difference between the money it makes from lending cash versus what it pays on deposits.

I do note that one reason for the high yield is due to the share price falling 18% over the past year. A contributing factor to this was a fall in profit in the full-year results, with the trading division (Winterflood) having a slower year. This is a risk going forward.

Income from a trust

The second company is the CT UK High Income Trust (LSE:CHI). The investment trust has a dividend yield of 6.39%. Over the past year, the share price is broadly flat.

Even though I like to pick specific stocks, I’m also happy to take on a trust that essentially holds a multitude of different shares. This is especially true when I’m trying to beat a Cash ISA return this year. I expect dividends to be cut for some companies due to a rocky 2023 trading period. At the moment, I can’t say for sure which sectors will be most impacted.

That’s why I’m happy to give my money to the professionals. They have the ability to research in much more detail than I can. They’re also experienced in building a portfolio. In short, I might just buy this one stock, but I’ve diversified my risk as this trust owns many shares. Each of these has the goal of generating income.

A risk is that 71% of the trust is invested in UK stocks. This does leave me exposed if the UK economy underperforms the rest of the world this year.

I feel both stocks allow me to achieve a higher return than a Cash ISA, without taking on excessive risk. When I get paid in March, I’ll look to buy both.

The post Forget a Cash ISA! Here are 2 dividend shares I’d buy in March instead appeared first on The Motley Fool UK.

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Jon Smith 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.

Motley Fool UK 2023