2 FTSE 100 green chips to consider with a Stocks and Shares ISA before 5 April
Image source: Getty Images
There is less than three weeks to go until the deadline for the Stocks and Shares ISA. And unlike a Lottery jackpot, unused amounts up to the donation limit don’t roll over — they just disappear.
Here are the blue chips from FTSE 100 which I think deserves a lot of attention right now.
A potential recovery stock
To say Diageo (LSE:DGE) has endured a difficult couple of years that could be underestimated. Now at a 14-year low, the price drop is slowly falling like one of those never ending ones. Wetherspoons stairs.
Shockingly, the fall from the top is 65%!
The company blames consumer income for weak sales. And with the war in Iran expected to cause inflation, trade may be even worse this year.
But under new CEO Dave Lewis, it looks like Diageo will adapt its much-hyped premiumisation strategy. Although it has been successful in the past, especially during the height of the pandemic, it does not seem to be fit for purpose when frugal consumers drink less and/or trade in cheaper products.
Diageo admits that “represents very little” As I see it, a firm can either wait and pray for cash flow to improve, or change its strategy to compete in sectors where consumers are spending money and there is potential for real growth.
For example, Diageo’s portfolio only plays in the top 25%–30% of the market in Latin America. If it enters the rest at lower price points, and does so reasonably globally, it can materially increase the total price and make up for any lost margin.
There are plenty of people who are currently unhappy with the brand from Diageo in our main categories…[But] that a very selective repricing needs to be done, it will be done surgically…We think, based on what we have seen so far, that there is a volume response to the repricing if we get it right. That is the opportunity.
Dave Lewis.
Management is also willing to provide for unmet needs Guinness in other British pubs. And although the dividend has been re-based to improve liquidity, the leading yield is still 3.7%.
High yield income
From respectable to remarkable now with the pension giant Legal & General (LSE:LGEN) and its previous yield of 9%. That’s high enough to generate £1,000 in tax-free income from an £11,100 investment in an ISA.
But is the payment sustainable? After all, profits are not guaranteed and company profits may suffer if inflation sends the UK markets and economy into trouble.
However this time, I am confident in the income potential. Backed by a very strong balance sheet, Legal & General is returning more than £5bn to shareholders in 2025 to 2027. This includes a £1.2bn share buyback, the largest in its history.
Looking ahead, there should be structural, growing demand for retirement products, supported by a rapidly aging population. It also simplifies its business while aiming to increase passive income.
The valuation looks cheap and there is a chance that the price may increase over time with regular purchases. Couple this with the generous income on offer, I think there’s a lot to like here.
I can see why Legal & General has been the most popular stock in the middle AJ Bell customers in the last month. Just this week, I joined the fun, buying another £1,100 worth of shares so that my portfolio could lock in that delicious 9% yield.
