A Self-Invested Personal Pension (SIPP) is a long-term investment vehicle, given that many people hold the pension wrapper for decades before drawing out a single pound.
That means it can be a natural fit for a buy-and-hold investor.so here are three UK shares I think investors should consider for their long-term potential.
Legal & General
The main attraction of Legal & General (LSE: LGEN) as I see it is the financial services firm’s bumper dividend yield.
At 8%, that is indeed attractive, in my view. In fact, that is the highest yield of any FTSE 100 company right now.
The sale of a US business this year means the group may actually shrink rather than grow. I see a risk that could eat into profits.
But underlying business performance remains strong and the firm has proven its excellent cash generation potential. That is supported by its strategic focus, large existing customer base and financial sector expertise.
Hopefully, although payouts are never guaranteed for any share, it can deliver on its plan to keep growing the dividend per share annually.
Aviva
Aviva (LSE: AV) is another FTSE 100 financial services provider that I think merits consideration. Over the past five years, while the Legal & General share price has fallen 3%, by contrast, Aviva’s share price has moved up 47% during that period.
That partly reflects a price recovery following a swingeing 2020 dividend cut by Aviva. Strong dividend growth since that cut means though, that the yield is now a compelling 6.5%.
Insurance is a business that ought to benefit from resilient long-term demand, which I think can fit well with the timeframe of a SIPP.
As the UK market leader in the general insurance market, Aviva can benefit from economies of scale and also the opportunity to try and sell a wider range of products to its large client base.
The UK focus also poses a risk, though. While Aviva still has some overseas footprint, its fortunes are strongly tied to its home market given the size of that business.
That makes it susceptible to smaller rivals trying to compete on price, which is a potential threat to Aviva’s profit margins.
Dunelm
Beyond the FTSE 100, I think investors should consider retailer Dunelm (LSE: DNLM).
Like Aviva, this is a business I expect to benefit from long-term demand. While the housing cycle may mean homeware purchases move up and down, they will not be going away altogether.
A strong buying operation, proven market expertise and lots of unique products help give Dunelm a strong position in this space.
It has managed to turn that into a successful, profitable retail outfit both online and offline that is a generous dividend payer. Currently the FTSE 250 share yields 5.8%.
The Dunelm share price has fallen 38% over the past year. Clearly, weak economic conditions and consumer confidence pose a risk to its sales.
Sales revenues in the first three quarters of its current financial year did actually grow 3%, but that growth has been slowing. The firm expects this year’s pre-tax profit to be at the lower end of analysts’ expectations.
On a price-to-earnings ratio of 11, this looks like a potential long-term bargain to me.
Should you invest £5,000 in Legal & General 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 Legal & General Group Plc made the list?
Christopher Ruane does not hold any positions in the companies mentioned.
