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Some of the FTSE 100Dividend stocks look pretty tasty right now.
The ones I like the most are found in a few sectors. And as a new investor, I would like to diversify. But I have a way to get some of that with just three actions.
A start
If I had £20,000 now to start my first ISA, what would I do? First, I would open my ISA straight away, before the deadline.
Then I would pay cash… and relax. There is no deadline to buy shares.
Still, I know the three stocks I would want today.
Big dividend
First is Phoenix group holdings, due to its 10% dividend yield. And also because I think insurance stocks are among the best long-term buys in the FTSE 100.
It can be a volatile sector, and you would surely expect ups and downs in this one. But Phoenix just affirmed a progressive dividend policy, so I think that makes the yield a little safer than usual. And today's valuation seems like a good option to address.
I also see great bank dividends. But I would skip them for diversification and save them for my next ISA allocation. Oh, that will be in just a few days.
cheap housing
A home builder is essential and they all seem good to me. So I think I would go for the 6.8% dividend Taylor Wimpey.
I still expect a tough couple of years ahead, as the full effects of high inflation and high interest rates could take some time to manifest.
But I would buy for the long term. And for decades, we have had high demand for housing and a shortage of supply.
Diversification
Finally, City of London Investment Trust (LSE: CTY), which spreads your money across a range of high-quality FTSE shares.
With one purchase, I would buy a few BAE Systems, CHILL OUT, Shell, HSBC Holdings, Unilever…and they are just the five main holdings of the investment trust, with many more.
The dividend yield has been around 5%, which is not the highest. But it is on the Investment Firms Association's list of 'dividend heroes', who have increased their dividends for at least 20 years in a row.
Dividend increases
The City of London has managed it for 57 consecutive years. If it were not able to raise the cash within a year, it could see a drop in the share price. But diversification should help.
The question is, how would you distribute the cash? I think I would be happy with 50% of my money in the City of London and 25% in each of the others. Each investor must decide their own differential.
But this allocation would give me an overall dividend yield of 6.7%.
My 4,900 pounds?
So how could I get my £4,900 a year? Well, a single £20k ISA spread across these three stocks and held for 20 years could get me there. That's 6.7% annually, reinvested and with no gains in the share price.
Alternatively, investing just £5,000 each year into an ISA could get me there in just over 10 years.
