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In case you haven’t noticed, us fools love stocks and shares ISAs. This is because of the generous £20,000 allowance that can be invested per year. More importantly, dividends received from shares purchased within this vehicle are not subject to tax.
Please note that tax treatment depends on each client's individual circumstances and may be subject to change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice. Readers are responsible for conducting their own due diligence and obtaining professional advice before making any investment decision.
Two options that I think are worth investors investigating further are: Howden Joinery Group (LSE: HWDN) and Safe store (LSE: INSURANCE).
Here's why!
What they do
Howden is one of the UK's largest kitchen and joinery companies in terms of market share. With a wide presence through its warehouses, the company sells directly to consumers, tradespeople and also to the construction industry.
Safestore is also a market leader in the self-storage sector, with a large number of self-storage facilities in the UK and expanding overseas as well.
The Howden Investment Case
From an optimistic perspective, Howden's growth story, as well as its performance and earnings, are hard to ignore. Organic and acquisition-led growth catapulted it to market dominance. However, I understand that past performance is no guarantee of future performance.
A recent update showed me that the company is looking to drive further growth by streamlining operations and increasing profitability.
In addition, the business could see growth linked to the housing shortage in the UK. Demand for kitchens and joinery products could soar as this imbalance is addressed.
From a fundamental standpoint, the stock offers a dividend yield of 2.4% and the company has a good track record of increasing dividends. Furthermore, I believe that this level of yield will increase. However, I understand that dividends are never guaranteed.
Turning to the other side of the coin, economic volatility, especially inflation, worries me. Rising raw material costs mean margins are at risk, and this could impact profits and returns. However, Howden's pricing power, linked to the power of its brand, reach and reputation, could counter this.
I personally own Howden shares and plan to hold them for a long time for profits and growth.
The Safestore Investment Case
Safestore, the self-storage giant, is another company that has seen fantastic growth. Like Howden, it has grown to become the largest company of its kind in the UK. Interestingly, it is also attempting to emulate this success in Europe. This is an exciting development in my view, as the European self-storage market is under-penetrated and a market that can be tapped into. Profits and returns could grow exponentially if it succeeds.
Looking at the fundamentals, Safestore stock appears to have an excellent price-to-earnings ratio. It trades at a price-to-earnings ratio of just over six. Additionally, a dividend yield of 3.7% is attractive and could also grow in the coming years.
From a bearish perspective, however, I am concerned about volatility. Even though the e-commerce boom means that storage space is in high demand, higher interest rates have hit net asset values (NAVs) and investor confidence. In addition, a cost-of-living crisis has meant potential rent defaults, and a slowdown in new business could hit returns and profits.
I would love to buy Safestore stock next time I have free funds.
