Searching for the best dividend shares to buy in a Stocks and Shares ISA? There are plenty of quality income payers on the FTSE 100 alone that demand a close look.
Two that have grabbed my attention this month are National Grid (LSE:NG.) and Standard Life (LSE:SDLF). As I’ll show you, the dividend yields on these Footsie companies beat the 3% index average by a good distance.
A rock-solid ISA pick?
Investing in the UK’s power network for the ‘net zero’ age is costing billions of pounds. National Grid has pledged £70bn between 2026 and 2031, more than double what it paid in the previous five years. It’s possible costs could keep spiralling, putting dividends in danger.
However, this huge investment programme also provides significant long-term opportunities that could power dividends. Expanding and modernising the grid should allow National Grid to grow its asset base by 10% a year, underpinning similar earnings growth.
What’s more, National Grid’s highly defensive business model makes it a more stable dividend payer than many other UK shares. The business benefits from:
- An industry monopoly protecting earnings from competitive dangers.
- Revenues that are linked to inflation.
- The defensive nature of electricity demand.
Unfortunately, these strengths didn’t stop National Grid from reducing dividends in 2024. But the company’s balance sheet is far stronger today thanks to a blend of equity raises and asset sales. So while risk remains, the chances of another cut are low.
For this financial year, the dividend yield on National Grid shares is 4%. This rises to 4.1% and 4.2% for the following two years.
A 7%+ income opportunity?
Standard Life’s operations are far more sensitive to the broader economy than National Grid’s. Market downturns can reduce assets under management and fee income. People may also contribute less in savings and pay reduced sums into their pensions.
So why does the company have (in my view) one of the best dividend records on the FTSE 100? In a nutshell, Standard Life’s operations are capital-light and generate enormous recurring revenues.
Spectacular cash flows and a strong capital ratio help it maintain a progressive dividend policy even in tough times. Its Solvency II ratio is an exceptional 176%, according to latest financials.
The result? Annual payouts at Standard Life have risen every year since 2016. In addition, the dividend yield has averaged 7.1% in that time. That’s exactly the sort of reliability many investors look for in a Stocks and Shares ISA.
The good news is City analysts expect the firm to remain hugely cash generative, underpinning more large growing dividends on top of share buybacks. Standard Life shares yield an enormous 6.7% for this year, and 7% and 7.3% for 2027 and 2028 respectively.
For Stocks and Shares ISA holders seeking long-term income, National Grid and Standard Life both deserve consideration. One offers reliable, defensive income, while the other combines market-leading yields and excellent dividend growth.
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Royston Wild does not hold any positions in the companies mentioned.
