Opening a Stocks and Shares ISA is a great way for both new and experienced investors to make the most of buying into the stock market, with capital gains tax and income tax not being payable if you stick within your annual allowance.
In the 2019-20 financial year, each adult in the UK has an ISA allowance of up to £20,000 that can be deposited into a Stocks and Shares ISA, as well as combined with other ISA products such as Cash and Help to Buy ISAs.
But what to do with that allowance? Which stocks could help me make the most of those tax breaks and provide solid returns for my investments?
Two FTSE 100 stocks that I see falling into that category are Melrose Industries (LSE:MRO) and Informa (LSE:INF).
Buy, sell, improve Melrose has an impressive track record of buying struggling industrial companies and turning them around before selling them on again.
Perhaps the biggest (and most controversial) of these purchases in recent times has been of car and plane parts maker GKN (LON:GKN).
So far Melrose has cut more than 900 jobs at GKN through the closure of a number of factories in the UK with the aim of making the engineering group more efficient.
While that strategy certainly has its critics, Melrose is vastly experienced in these types of operations and it has forecast profit margins to rise to more than 11% in 2019, from 7.4% in 2018.
Despite reporting a pre-tax loss of £550m in its full-year results in March, adjusted diluted earnings per share were up 36% on the previous year period, ahead of board expectations.
Nortek Group, another key investment for Melrose, saw operating margins increase to 14.7% in the annual results from 8.7% at the time of acquisition, highlighting the strength of its ‘buy, improve, sell’ mantra.
This track record is a key reason why I believe Melrose will be able to boost GKN’s bottom line and ultimately lead the parent firm’s stock to growth in the long term.
Growth potential Publishing and events specialist Informa reported strong annual results in March following its acquisition of UBM, removing a smaller competitor from the market and driving sales higher.
Operating profits were 34.4% higher for the year, with the latter two quarters including that £4bn UBM purchase.
The Informa share price suffered some turbulence in 2018, although it must be noted that there are not many stocks that were unscathed in a tumultuous year for equity markets.
Since the beginning of 2019, the Informa share price has risen 24.38%, and at 785.6p, my feeling is that it can continue to grow with more favourable market conditions this year.
Informa has also been a solid dividend stock, recently announcing a full-year payout of 14.85p per share to be paid in May, equating to a total dividend for the year of 21.9p and a 3.5% yield.
I’d always look at buying FTSE 100 dividend stocks as a way of enhancing my income potential via my Stocks and Shares ISA, and Informa would fall into that income category for me, as well as providing strong growth prospects.
Conor Coyle has no position in any of the shares mentioned. The Motley Fool UK owns shares of Melrose. 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