How to look for affordable shares to buy with your blank ISA before it’s too slow

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The FTSE100 it has been exceeding 8,000 points for about a month now. Are the days of affordable shares over?


Well, over the last 10 years, the rate has increased by just 23% – with about half of that boost in 2024 alone!

Dividends would add some. But it still looks like a indigent 10-year experience compared to Footsie’s long-term average returns of about 6.9% per year.

Almost double

This should result in an boost of 95% every decade. It also suggests that FTSE 100 shares are still relatively affordable, even after this year’s gains.

I haven’t used the fresh Stocks and Shares ISA allowance so far. But that’s only because I don’t have the cash yet. When I do that, I’ll buy as many affordable stocks as I can.

Dividend yields are still high, so that’s my starting point. And I might choose my first buy from a cyclical sector that I think has fallen below the radar.

Cyclical dividends

Not so long ago, mining actions included: RioTinto (LSE: RIO) had very high profits and everyone wanted them. The sector then rejected the offer as global inflation soared and Chinese demand fell.

But such cycles are common. And the prices of goods can vary significantly.

How can the long-term demand for copper, iron and all the rest of the earth’s goods not be high? Without them, no one will build much.

Forecast value

As of today, we forecast a dividend yield of 5.9% and a forward price-to-earnings ratio (P/E) of 10.3.

Raw material prices are still somewhat faint. For example, the price of iron ore is well below the 2021 peak prices and this is the main risk. Rio and companies like it have no control over global prices and could suffer during a downturn.

However, I see a low valuation and would buy Rio in anticipation of greater demand in the future.

Beware of value traps

However, excessive dividends can destroy value. For years, BT Group AND Vodafon he withdrew a huge amount of cash that was not covered by earnings. Investors noticed this, and share prices fell slowly and steadily.

There is no such thing as a free dividend, and shareholders pay with capital losses.

The inevitable has happened for Vodafone, which will see its 10% profitability cut in half next year. Meanwhile, BT was able to turn things around after posting a nice set of results.

Both could be ISA candidates for me now, but neither is ready yet. I’ll keep watching.

More essentials

What all these stocks have in common is that they provide basic goods and services. And that’s where I look for more value in affordable stocks.

So maybe I’ll buy it Tesco Or Unilever ahead of everything that happens in the leisure industry, such as holiday airlines or fashion brands.

And I would always like to have at least one bank or other financial company in my ISA. Finance is as critical as food and drink, without it no business or economy can function.

Complete this ISA

Whether I will buy any of the stocks I mention here, I haven’t decided yet. This will depend in part on valuations at the time.

But while I wait for my ISA allowance to remain untouched, I’m relishing the hunt for affordable shares while they last.


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