3 FTSE 100 stalwarts to consider ahead of possible ISA changes

There’s been speculation that in November’s budget, the Chancellor’s going to introduce a minimum holding for UK companies in a Stocks and Shares ISA. With this in mind, here are three domestic stocks to consider putting in a ‘Brit ISA’. All are members of the FTSE 100 and have been in the index since it was launched in January 1984.

Good for income

At the moment (24 October), Legal & General (LSE:LGEN) is the highest-yielding stock on the Footsie. Of course, there’s no guarantee this will continue but the wealth manager has promised to increase its dividend by 2% a year from 2025-27. It’s also planning a series of share buybacks.

Significant future earnings growth is anticipated from its pension risk transfer business. The group recently reached the landmark of £200bn of defined benefit contribution scheme assets under management.

However, the group’s share price has lagged behind the FTSE 100 over the past five years. And it operates in a very competitive industry with a number of its challengers having a lower cost base.

But with its strong balance sheet, healthy pipeline of potential new business and generous dividend, I think it’s a British stock worthy of consideration.

Untapped potential

The share price of BP (LSE:BP.) will ebb and flow in line with energy prices. This means its stock market valuation can be volatile. It’s also unpopular with ethical investors so there’s a smaller pool of potential buyers to drive its market cap higher.

However, in response to shareholder pressure, the oil and gas giant is going through a bit of a transformation at the moment. It’s seeking to boost its free cash flow by drilling more, divesting some non-core assets and cutting costs.

BP has relatively higher production and operating costs compared to many of its rivals. If it can close the efficiency gap – and I don’t see why it can’t — then its share price should increase irrespective of what happens on world commodity markets. It’s also in the top 10 of dividend yields on the index.

For these reasons, it has a place in my ISA and why I think other investors could consider adding it to theirs.

Still number one

Despite the threat of the so-called discounters, Tesco (LSE:TSCO) remains the UK’s largest grocer. Its current market share of 28.3% is higher than it was in October 2020 and is more than that of its two nearest rivals combined. And despite having to cut prices to see off increased competition, it has enough cash to pay a dividend in line with the FTSE 100 average.

But it can’t afford to rest on its laurels. Industry margins remain wafer thin and supermarket price wars are a constant threat. There’s also some speculation that the government wants to shift the burden of commercial rates away from smaller stores to larger ones.

However, Tesco has shown itself to be remarkably resilient in recent years. Despite facing higher National Insurance costs and supply-chain inflation, its adjusted earnings per share for the 52 weeks ended 22 February (FY25) was 25% higher than in FY21. It’s also become more efficient as demonstrated by a 16% rise in sales per full-time equivalent employee.

As a British stalwart, I think the stock’s one to consider putting in a domestically-focused ISA.

The post 3 FTSE 100 stalwarts to consider ahead of possible ISA changes appeared first on The Motley Fool UK.

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James Beard has positions in Bp P.l.c. and Legal & General Group Plc. The Motley Fool UK has recommended Tesco Plc. 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.

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