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Looking for stocks to buy in a tax-efficient Stocks and Shares ISA? Here’s a top FTSE 250 share and a popular exchange-traded fund (ETF) I think demand a close look.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
iShares Physical Gold ETF — playing gold’s bull run
Gold’ may have lost some of its lustre in recent hours, pulling funds like iShares Physical Gold ETF (LSE:SGLN) lower. Demand for the safe-haven asset has dipped as news of a US-China trade deal’s boosted demand for riskier ones.
There may be further volatility in the days and weeks ahead, and particularly as investors seek to book profits. But I believe bullion’s multi-year bull run is far from over, meaning gold ETFs remain attractive assets in my book.
There’s a blend of factors that suggest gold may hit new records above current peaks around $3,500 an ounce. Mounting geopolitical tensions, and lasting uncertainty over US economic and foreign policy. A raft of further interest rate cuts will also support the inflation-hedging precious metal, along with possible further falls in the US dollar.
Strong central bank buying should also keep fuelling gold’s price boom. Institutions bought 244 tonnes of the metal in quarter one, prompting the World Gold Council (WGC) to predict “another strong year of buying.”
ETFs like this are more convenient ways for retail investors to trade gold than buying physical gold. And this particular iShares one has one of the lowest expense ratios on the market (at 0.12%).
Target Healthcare REIT — a FTSE 250 dividend machine
Real estate investment trust (or REIT) Target Healthcare (LSE:THRL) has risen sharply in recent months, driven by hopes of a sustained fall in interest rates. But to my mind it still looks dirt cheap.
At 99.5p per share, the FTSE 250 business — which operates 94 care homes across the UK — trades a whopping 14% discount to its net asset value (NAV) per share.
It also packs a vast 6% forward dividend yield. This reflects in part REIT rules, which state at least 90% of profits from rental operations must be distributed in the form of dividends.
Target could be one of the most secure passive income stocks to own today, in my opinion. Not only does it operate in a highly defensive sector. With 34 tenants on its books, it has the depth to absorb any individual setbacks that could impact earnings and dividends.
Furthermore, its tenants are sealed into on ultra-long-term contracts, providing excellent long-term profits visibility (the weighted average unexpired lease term (WAULT) was 26.1 years as of December).
On the downside, new UK immigration policy poses a potential long-term problem to the care homes sector. More specifically, tighter rules could impact inflows of key healthcare workers, potentially pushing up tenants’ costs and reducing occupancy rates.
Yet on balance, I still think the trust’s outlook is extremely bright over the coming decades, underpinned by soaring care home demand as Britain’s elderly population rapidly grows.
