Buying the best UK shares that offer generous dividends may not seem like a sound move after the recent stock market crash. After all, the political and economic outlook is uncertain, and investor sentiment could easily deteriorate in the coming weeks.
However, high-yield stocks could become more popular in a low interest rate environment. Furthermore, high-quality FTSE 100 and FTSE 250 shares could survive a weak outlook and improve on their market positions.
Meanwhile, today’s low stock prices may present capital appreciation potential over the long run. As such, buying a diverse range of stocks in an ISA may prove to be a profitable move.
Investing money in UK shares with big dividends
The stock market crash means many UK shares now offer relatively impressive passive incomes. Their lower share prices mean their dividend yields have risen so that they offer 5%+ income returns, in many cases.
These high yields could become increasingly popular over the coming years. Interest rates look set to remain at a low level for a prolonged period of time. The weak economic outlook has the potential to encourage an even more accommodative monetary policy in the medium term. This could mean the return prospects for cash and bonds decline even further.
The end result could be rising demand for UK shares with generous dividend yields. This may lead to improving share price performances. And that could deliver an impressive total return for investors in today’s high-yield British shares.
Buying the best shares
The best UK shares are likely to survive the coming economic challenges. For example, they’re likely to have strong balance sheets that mean they can overcome a period of lower sales. Similarly, their economic moats are likely to mean they can sustain stronger performance than their sector peers. This may even lead to a stronger market position over the long term at the expense of weaker rivals.
Of course, identifying the best stocks to buy today is a subjective task. However, an investor can build an accurate picture of a company’s strengths and weaknesses by focusing on its fundamentals via annual reports and regular market updates.
Cheap shares after the stock market crash
The stock market crash has caused many UK shares to trade at cheap prices. History suggests that they may not be available for a prolonged period of time, since today’s bull market is likely to ultimately be sustained over the long run.
As such, buying a diverse range of FTSE 100 and FTSE 250 shares today could lead to impressive returns over the long run. They may have a large amount of capital appreciation potential from their low base. This could catalyse an ISA’s performance in the coming years and lead to impressive total returns.
The post Top stocks for an ISA! 3 reasons why I’d buy the best UK shares with big dividends today appeared first on The Motley Fool UK.
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 2020