A Stocks and Shares ISA is one of the most powerful tools UK investors have for building long-term, tax-efficient income.
The London Stock Exchange is packed with generous dividend payers, and right now there are 42 FTSE 350 names offering yields of 6% or more. And among them, I’ve been looking closely at two stocks in particular, both yielding 6.8%.
Is OSB Group’s yield worth the risk?
OSB Group‘s (LSE:OSB) a specialist lender focused on buy-to-let and residential mortgages, funded mainly through retail savings. It targets niche segments such as professional landlords, commercial property and more complex borrowers, using broker distribution and its Kent Reliance and Charter Savings brands.
The bull case starts with the numbers. In its latest first-quarter update, OSB grew its net loan book by 0.9% to £26.2bn, with new lending up 11% to £1.2bn alongside retail deposits rising by 1.8%.
Combining this lending portfolio with solid credit quality, robust regulatory capital buffers, and a recently launched £100m share buyback programme, OSB appears to be in fairly healthy shape.
However, the company’s firmly tied to the UK housing and mortgage cycle. Management’s clear that its net interest margin guidance of around 2.25% ultimately depends on external factors like interest rates.
A tougher macro backdrop, stickier inflation or renewed pressure on mortgage affordability could all squeeze margins and slow loan growth which, in turn, would put its generous dividend under more scrutiny.
Is Hilton Food a tastier ISA pick?
Hilton Food Group (LSE:HFG) operates in a very different space. It’s a food packing and processing business that supplies fresh meat, seafood and prepared foods to major supermarkets across the UK, Europe and further afield.
Like OSB, its latest trading update was encouraging. Hilton confirmed that full‑year guidance is unchanged, with adjusted pre-tax profits still expected in the £60m-£65m range.
Core meat and fresh prepared food businesses are trading well, with positive momentum in Australia, New Zealand and Central Europe, and slightly higher volumes in Western Europe compared with last year.
But like any business, it’s not all plain sailing. Seafood, vegetarian and vegan operations remain challenging, and the group’s pushing cost-cutting measures at its Seachill unit while working to improve performance at Foppen and Dalco.
Capital expenditure is expected to be about £100m this year, meaning net debt will rise as Hilton invests in new capacity in Canada, Saudi Arabia and Poland.
For ISA investors, that mix of growth capex and higher leverage is a risk factor that needs to be monitored.
Which looks better?
For me, both stocks have appeal, but in different ways. OSB Group offers classic financial‑sector income. It’s a high-yield supported by strong capital, buybacks and disciplined lending, but with clear exposure to interest rates and the UK housing market.
Hilton Food Group looks more defensive, with sticky supermarket contracts and global diversification, offset by pockets of underperforming business lines and rising investment spend.
In a diversified Stocks and Shares ISA, I could see a case for holding both. But personally, I think OSB’s higher-octane financial income could be the more lucrative of the two, albeit at a higher level of macroeconomic risk.
Nevertheless, for investors seeking promising tax-efficient income opportunities, both could be worth a deeper investigation.
Should you invest £5,000 in Hilton Food Group Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Hilton Food Group Plc made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
