A Stocks and Shares ISA allows a long-term investment window. That means you can mix a variety of types of company within it. When investing, I buy some shares that I think are likely to grow in value. But I don’t just focus on growth. I also seek income, so I look for established companies that are reliable dividend payers.
That strategy would give me the best of both worlds – growth and income. Over time, both approaches could pay off. Based on this strategy, there are two shares I would buy for my Stocks and Shares ISA at their current prices: one for income and the other for growth.
I’d pick GSK for regular income
The news about Covid-19 vaccines has sharpened investor focus on pharma stocks. Some have done well, but one leading pharma stock that has performed weakly this year is British giant GlaxoSmithKline (LSE: GSK). Even after strengthening in the past couple of weeks, the shares still trade almost twenty per cent down on the year.
That gives an opportunity to pick the shares up cheaply. GSK is a well-established pharma company. It has grown sales and profits every year for the past four years.
The risk of lower profits due to reduced antibiotic demand has hit the shares this year. I am not worried about that, because long term I expect the company can rely on income from its large drug franchises such as Juluca and Trelegy. Its consumer brand business also has powerful brands like Panadol and Sensadyne.
The company pays shareholders an annual dividend of 80p, making the yield a solid 5.5%. The dividend has been static for years, but it is covered by earnings. I don’t expect a cut.
GSK has been a solid dividend payer, continuing its quarterly payments throughout the pandemic. In a Stocks and Shares ISA, I find a regular dividend payer like GSK attractive because every payment can compound value over time.
S4 Capital is my Stocks and Shares ISA growth choice
As well as income, I’d look for a stock I expect to grow in value in years to come.
Advertising legend Sir Martin Sorrell spent decades building up WPP through acquisitions. After leaving WPP in 2018 he started a new digital advertising company using the same approach, called S4 Capital (LSE: SFOR). I like the acquisition growth model – it enables an ad agency to scale up to manage global accounts. It is also faster than organic growth. With a proven dealmaker at the helm, S4 Capital has been growing fast. As digital media grows, S4 has a lot of continued opportunity to increase its scale. That is why I like S4 Capital as a growth pick for a Stocks and Shares ISA.
S4 Capital’s approach has signed up major accounts such as Google and BMW. The company recently affirmed its expectation to double gross revenue and margin organically over three years. Acquisitions add to that.
The stock market likes the S4 Capital story, with the shares more than double where they were in January. The company looks set to continue growing fast – third quarter revenues were up 53% compared to the prior year. With growth like that, I like the stock as a growth pick.
Don’t miss our special stock presentation.
It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.
They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.
That’s why they’re referring to it as the FTSE’s ‘double agent’.
Because they believe it’s working both with the market… And against it.
To find out why we think you should add it to your portfolio today…
- The GlaxoSmithKline share price has slumped 22%! Here’s why I’d buy it
- The FTSE 100 has surged 14% this month, but I’d keep buying these cheap shares!
- Why I think GlaxoSmithKline and this company are two of the best shares to buy now
- Could GlaxoSmithKline and this high-yielding share maximise my profits in a stock market recovery?
- ISA alert! I think GlaxoSmithKline is a great buy for both income and growth investing
Christopher Ruane has shares in S4 Capital. The Motley Fool UK has recommended GlaxoSmithKline. 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.