Image source: Getty Images
There are some excellent bullish traits when it comes to stocks and shares ISA. One is the fact that dividends received are not subject to tax. Additionally, a generous annual allowance of £20,000 is attractive.
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, nor does it constitute, any type of tax advice. Readers are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.
Considering the former, it makes sense to me to buy and hold quality dividend stocks to help build wealth.
Two stocks I would love to buy for my ISA next time I can are GSK (LSE: GSK) and Lloyds Banking Group (LSE: LLOY). Here's why!
GSK
I find pharmaceutical giant GSK an attractive prospect for several key reasons.
First of all, I believe that the creator of drugs and medicines possesses defensive attributes. This is due to the essential nature of their work in helping to cure the world's diseases, including cancer and HIV.
Plus, in my opinion, it has some pretty attractive fundamentals. The stock appears to be good value for money with a P/E ratio of 15. This is lower than the average in recent years, so it could now be a great entry point.
Additionally, a 3.9% dividend yield is decent and could potentially grow. This is due to GSK's healthcare research and development pipeline of future medicines and treatments, which appear strong. However, it is worth mentioning that dividends are never guaranteed.
From a bearish perspective, the current legal problems with his Zantac drug, which could have huge financial implications, is a dark cloud hanging over him. I will be attentive to the evolution. However, this is a risk for all pharma stocks.
Overall, a track record of success in its field, a dominant market position, shareholder value and attractive fundamentals make GSK an obvious choice for me.
Lloyds Banking Group
As one of the UK's so-called “big four” banks, Lloyds occupies a vital position in the country's banking ecosystem.
From a bearish view, the new kids on the block and industry disruptors like Monzo and Metro Bank threaten to disrupt the status quo of the banking sector. They are working hard on aspects such as customer satisfaction and offering them an alternative. The decline in its market share could hamper Lloyds' progress. In addition to this, economic volatility is not good news. For example, higher interest rates and mortgage costs could lead to loan defaults. This could harm Lloyds' bottom line and shareholder returns.
Moving on to the other side of the coin, Lloyds is the largest mortgage provider in the UK. This could be a source of income for the business in the future, as demand for homes is outstripping supply. It could leverage its dominant market position to generate higher profits and hopefully pass this on to its shareholders.
Speaking of yield, Lloyds shares currently offer a dividend yield of 5%. Additionally, the stock appears to be excellent value for money with a price-to-earnings ratio of just eight.
Although economic volatility is rife at the moment, Lloyds' track record, market position and performance prospects make the stock worth buying for me and my holdings.
