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The coming weeks will likely see a rush of investors putting money into UK dividend shares in an attempt to beat the year-end ISA deadline. If I had £20,000 to invest in income shares in my ISA right now, here is how I would do it.

Think a decade ahead

As an income investor, I would be thinking not just about the potential for dividends now, but also in the future. To pay out dividends consistently over time, a company needs a business model that is likely to generate surplus cash both now and in the future.

One way to do that is to imagine the world in 2032. What sorts of business that already pay dividends today might continue to be doing well then and generating substantial free cash flow? I would say there is a high chance that demand will remain high for utilities like National Grid and Pennon. I also expect people will still be buying premium brands from consumer goods giants such as Unilever and Diageo.

What about emerging industries that could be doing well in a decade? I see ongoing growth potential in online retail. I also expect technology firms delivering technical infrastructure as well as software services to do well. Cybersecurity could be another big growth area. A lot of companies in these areas do not currently pay dividends – but could that change in the coming decade? Maybe it will. From an income perspective, though, I would rather invest in dividend shares that are paying out now and hopefully will keep paying, rather than businesses that do not already pay dividends.

Diversifying my ISA picks

To reduce my risk, I would diversify across different companies and business areas. With £20,000, I could invest £2,000 in each of 10 different companies. My plan would be to limit my choice to two from any one business area.

So, for example, I would buy both Imperial Brands and British American Tobacco. The duo of British tobacco giants face the risk of declining cigarette demand hurting revenues, but their new lines of products like modern oral are growing fast. Meanwhile, cigarettes continue to fuel huge cash flows.

I would also plump for insurers Direct Line and Legal & General. With well-established brands and resilient demand, I see them both as potentially rewarding UK dividend shares for my ISA. Changing rules on insurance pricing transparency may hurt profitability. But the reverse might also happen – a simpler marketplace could lead to lower costs for providers, boosting profitability.

UK dividend shares to buy now

Consumer goods giants Unilever and Reckitt face a risk to profits from high inflation. But I think their premium brand portfolios give them pricing power that could help combat this. Unilever’s current yield of 4.5% should produce £90 of income annually for my £2,000.

Among the utilities, I would buy National Grid and United Utilities. They benefit from robust demand I expect to last for decades. Shifting patterns of electricity use could mean capital expenditure hurts profits, though.

Finally I would buy 10%+ yielding housebuilder Persimmon and 9.6% yielder Income & Growth Venture Capital Trust. High yield often signals perceived risk –- a declining British economy could hurt profits both for Persimmon and the companies in which Income & Growth invests. But I feel the risk is priced in to these final juicy yields for my ISA.

Christopher Ruane owns shares in British American Tobacco, Imperial Brands and Unilever. The Motley Fool UK has recommended British American Tobacco, Diageo, Imperial Brands, Pennon Group, Reckitt plc, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Key points

• For the final three months of 2021, revenue increased fivefold, year on year
• During the same period, the airline flew 11.9m passengers, compared to 2.8m for the same period in 2020
• Some countries, like Norway, have removed all pandemic-related entry restrictions

The Covid-19 pandemic battered the entire airline industry. With a resurgence in international travel, however, I’m finding the easyJet (LSE:EZJ) share price increasingly attractive. In addition, recent results suggest the company is turning a corner. It is currently trading at 455p and I want to know if I should add this firm to my long-term portfolio. Let’s take a closer look.

Recent results and the easyJet share price

In a recent trading update for the three months to 31 December 2021, group revenue increased nearly fivefold to £805m. Additionally, pre-tax losses almost halved to just £213m. For me, this is a strong indication that the business is starting to benefit from the lifting of international travel restrictions.

Another important metric for gauging airline recoveries is the load factor, together with passenger numbers. The load factor shows the number of passengers that travelled as a proportion of the available seat capacity.

For the final three months of 2021, easyJet flew 11.9m passengers. This represented a load factor of 77%. Conversely, for the same period in 2020, the airline flew just 2.8m passengers. This was a load factor of 66%. This tells me that more passengers are flying and more easyJet aircraft are in the skies. Rival airline jet2 is not enjoying the same trend. While its passenger capacity is rising, its load factor is falling.   

Improving conditions

With the escalating military situation between Russia and Ukraine, both Evraz and Polymetal International, firms operating in the region, will be demoted to the FTSE 250. There is some speculation that easyJet will join the FTSE 100. This could be good news for the easyJet share price, as FTSE 100 tracker funds will begin holding the company.

It is worth noting, however, that this conflict has also resulted in rapidly rising oil prices. The repercussions for the airline industry could be negative, because the price of jet fuel may well increase. This could eat into easyJet’s future balance sheets. Furthermore, any new Covid-19 variants could mean trouble for international travel. In this scenario, the easyJet share price may suffer. 

However, some countries have started removing all pandemic-related restrictions. Norway, for instance, has returned to pre-pandemic entry requirements. Furthermore, Sweden implemented similar measures, but limited this to EU citizens for now. Also, the investment bank Liberum recently placed a ‘buy’ rating on easyJet, stating that it thought “restrictions will be eased appreciably for travel at Easter”. 

The future looks bright for the easyJet share price. Given recent results and the fact that the pandemic appears to be retreating, I think it is indeed a glaring buy for my portfolio. I will purchasing shares without delay. 

Andrew Woods owns Polymetal International. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Stocks like Apple, Adobe, and Visa have proved to be great investments. Investments like these have a number of common features. One is that they have dominant positions in the industries they operate in. Another is that they have desirable economic characteristics. Taken together, these features have allowed Apple, Adobe, and Visa to generate huge returns for shareholders.

The problem with stocks like these, though, is that pretty much everybody knows about them. This means shares in these companies are nearly never cheap. Even in times of stress, market participants are drawn to these stocks as relative safe havens. As a result, I think the best stocks to buy for my portfolio now are ones that have similar features to Apple, Adobe, and Visa, but that are less well-known than those big names.

I’ve found a stock to buy right now that I think fits the bill. The company is modernising an industry still reliant on technology that—in some cases—dates back to the 1950s. It has a dominant position within its industry, winning more business annually than all of its major competitors combined. And in its 20 years of operating, the company has never lost a customer to a competitor.

Best of all, I think the company is currently flying under the radar of most investors. Its market cap is just over $7bn, which means it’s too small to make a meaningful difference to the portfolio of someone like Warren Buffett. But it’s plenty big enough for an investor like me. Any guesses as to what it is?

The company

The stock I’ve been buying is Guidewire Software  (NYSE:GWRE). The company provides operating software to the insurance industry. If you’ve ever heard of Salesforce, think of that but with a much more specialised focus. Guidewire concentrates on being the best within its niche and, as far as I can see, it’s leaving its competitors in the dust. 

I think that Guidewire’s size protects it reasonably well from disruption. Since it produces more revenue than its next five competitors combined, it has the scale to fend off smaller competition. But for a bigger player like Salesforce, the opportunity in the insurance sector is unlikely to be big enough to justify the resources needed to compete with Guidewire.

At the moment, Guidewire is unprofitable. Unprofitable companies, such as Guidewire, have been hit hard by the market lately. At the time of writing, Guidewire stock is down around 33% from its highs. As interest rates rise to combat soaring inflation, there’s a risk that Guidewire stock might underperform for a few years.

Over time, however, I think that Guidewire’s business should win out for me as an investor. The company is in an excellent financial position, with current assets more than covering total liabilities. And I expect it to expand into the substantial untapped opportunity within its industry. Guidewire looka like one of the best stocks for me to buy now for my portfolio, while growth stocks are out of fashion. And if they stay out of fashion for an extended period of time, I intend to keep buying.

Stephen Wright owns shares in Guidewire Software. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Key points

• Net profit for the 2021 calendar year was “broadly in line” with expectations
• The share price may be cheap, with a lower trailing P/E ratio than a major rival
• Petrofac signed a major deal in February 2022 with the Abu Dhabi National Oil Company, worth $1.65bn

As a company providing maintenance, construction, and support services to the oil and gas industry, Petrofac (LSE:PFC) operates in every corner of the globe. It is currently working on over 200 projects, stretching from the Omani desert to the Arctic. With the world now recovering from the Covid-19 pandemic, should I be buying at the current Petrofac share price? I have a spare £1,000 and I want to know if I should add this company to my long-term portfolio. Let’s take a closer look.

Recent results and the Petrofac share price

In its annual results for the 2021 calendar year, the firm stated that its net profit was “broadly in line” with expectations. While this was no pleasant surprise for investors, it is nonetheless consistent. Furthermore, the company’s new order intake over 2021 amounted to around $2bn. This compared to just $500m for the first half of 2021.

In addition, the business has been making efforts to refinance itself following a January 2021 investigation by the Serious Fraud Office into allegations of bribery. Ultimately, a senior employee pled guilty to bribery charges and the company was fined £77m. The firm is also on track to meet cost-saving targets of $250m. It is worth noting, however, that any new pandemic variant could halt the company’s operations. 

I also think the Petrofac share price may be cheap. The company has a trailing price-to-earnings (P/E) ratio of just 10.36. A close rival, Maire Tecnimont, has a trailing P/E ratio of 12.33. This suggests to me that Petrofac is undervalued. It is currently trading at 114p, down 24% in the past year.  

Recent contract activity

The firm entered into a number of contracts in February 2022. The first was with Cairn Energy. This involves maintenance operations for oil and gas projects across India. This contract itself is worth around $100m.

Furthermore, the company signed a bumper contract on 20 February with the Abu Dhabi National Oil Company. This is worth $1.65bn and involves support and construction services for offshore gas projects.

Additionally, Petrofac signed a memorandum of understanding with Seawind Ocean Technology. This work will support offshore wind turbines in the Mediterranean Sea by Q1 2024. This also demonstrates how the company is expanding its scope to include renewables in addition to more traditional forms of energy.

Overall, the business is clearly very active in securing contracts. Its recent deals nearly equate to the whole order intake during 2021. What’s more, the Petrofac share price may well be cheap at current levels. With recent fraud issues largely behind the firm, I will be using my spare £1,000 to buy shares in the company without delay.    

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Key points

• Investors are still concerned about the possibility of sanctions following the Russian invasion of Ukraine
• 2021 Q4 gold sales increased by 15%, year on year
• Total gold production for the 2021 calendar year declined by 18% compared to 2020

Operating exclusively in Russia, Petropavlovsk (LSE:POG) is a gold mining company. The firm has hit headlines over the past fortnight because of the ongoing military situation between Russia and Ukraine. Shares are currently trading at 3.45p, up nearly 50% today. With the POG share price down 90% in the past year, however, should I be adding this business to my portfolio? Let’s take a closer look.   

Recent activity and the POG share price

Given that Petropavlovsk exclusively operates in Russia, investors have been concerned about the company ever since the Russian invasion of Ukraine. In the last month, for instance, the share price fell 83%, while over the past week it is down 70%. This price movement has been troubling to watch. 

The main worry is that sanctions could target the firm. This would likely make trading very difficult. In addition, it would limit the client base to which it could sell its gold. Until now, however, no sanctions have targeted the business. 

On the other hand, we may soon see a ceasefire agreed. The situation could improve markedly, not only for the civilians, but also for the POG share price. In the meantime, however, the situation remains very uncertain and that is not attractive to me, a potential shareholder.

Company results

The firm recently released a production and sales report for the 2021 calendar year and Q4 2021. For Q4, total gold production increased 26% year on year, while own-mined gold production rose by 53%. Furthermore, gold sales for this period increased by 15%, year on year.

For the full year, however, the story is not as positive. Total gold production for 2021 was down 18% compared with 2020, although own-mined gold production grew by 1%. Also, gold sales for the 2021 calendar year fell by 20%.

In addition, the company’s cash balance in 2021 Q4 declined by about $10m since the previous quarter. On the flip side, the firm reduced its debt by $2m over the same time period.

With a trailing price-to-earnings (P/E) ratio of 12.85, this is lower than the 19.79 for Barrick Gold, a major competitor in the gold market. While this may indicate that Petropavlovsk is undervalued at the current share price, recent results aren’t particularly exciting. What’s more, the firm is subject to governance issues from $300m of transactions involving potential conflicts of interest.  

The company has been caught up in the investor exodus from firms operating in Russia. As the situation continues to be uncertain, I won’t be going anywhere near this business for the moment, regardless of the low P/E ratio. I will be waiting to gain a better understanding of where the Ukraine conflict is headed, while watching for further results. I prefer to give the current POG share price a miss. 

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

After a turbulent week in global markets, it’s clear that inflation is only likely to worsen in 2022. Exiting investments and sitting on cash is an easy way to lose real value. So, I’m opting to prop up part of my portfolio with three of the top-yielding UK dividend stocks.

With prices rising at their fastest rate for 30 years, a perfect storm is coming closer. Inflation is expected to exceed 7% in April, while UK pay packets will be further eroded by increased national insurance, higher mortgage rates and spiralling energy costs.

As an existing shareholder of tobacco company Imperial Brands (LSE: IMB), I’d already been seduced by one of the highest dividend yields in the FTSE 100. At its current price of 1,465p, the company offers an expected yield of over 8%, beating inflation forecasts.

The recent dip in its share price may be a further buying opportunity for me, although Imperial isn’t immune to the effects of war in Eastern Europe. Around 2% of its revenue comes from Russia and it also employs over 600 staff in Ukraine.

Unloved by many financial institutions that are unwilling (or unable) to invest in so-called unethical businesses, Imperial has a solid business model and is likely to maintain high dividend payouts. I’ll be adding to my holding in due course.

Undervalued dividend payer

In a very different field, M&G  (LSE:MNG) is also a big dividend payer (its yield is close to 9% of the current share price). I was curious to understand why the company appears undervalued at present.

Obviously the asset management business in the UK is a highly competitive sector. Market leader Legal & General Group manages over three times the volume of assets that M&G does. Consolidation in the sector has also dropped the company down the rankings in recent times.

Nevertheless, consensus forecasts provided by analysts in February show expected operating profits close to 2021 numbers and a slight increase in the dividend is forecast for the year ahead. 

It remains to be seen how the conflict in Ukraine will affect the investment sector. Indeed the rising cost of living could well force some investors to draw down their pension pots.

Cash is however losing value at its fastest rate for 30 years, so I expect asset managers such as M&G to continue to perform well. If the company weathers the immediate market turbulence, I will be looking to buy this stock.

Cash-rich housebuilder

My final pick is UK housebuilder Persimmon  (LSE:PSN) whose dividend yield currently sits at around 10%. 

The Persimmon share price has suffered significantly over the past 12 months. In fact, it has fallen from a high of over 3,272p to around 2,314p at present. Obviously, rising mortgage costs and inflation may well dampen demand in the housing sector.

Looking forward though, I take comfort from the healthy financial position of Persimmon. In its recent results,  the company posted full-year profits approaching £1bn. It also has a healthy cash buffer of £1.246bn and forward sales of over £2.2bn. 

As a mass-market builder, Persimmon will not be immune to short-term market shocks. Its focus on energy-efficient new homes at the lower end of the price spectrum should however favour the company going forward. I like its healthy dividend payout as a hedge against spiralling inflation and will be adding this share to my portfolio.

Fergus Mackintosh currently own shares in Imperial Brands. The Motley Fool UK has recommended Imperial Brands. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Warren Buffett, aka, the Sage of Omaha, is one of the most successful investors of all time and a well-known billionaire. His investing style, though, has changed over time, partly thanks to his business partner, Charlie Munger.

These are my top Warren Buffett stocks – ones that might fit the mould of how the Sage of Omaha would invest, if he was looking at high-quality, undervalued UK shares.

They are the ones I’d be most tempted to buy with my next £250 of cash.

Top Warren Buffett stocks

The search for Warren Buffett stocks is not easy, of course. Yet I think there are two that fit the mould based on a margin of safety and an enduring brand quality.

Shares in the spreadbetter IG Group (LSE: IGG) have been falling, creating a greater safety of margin. Combining that with a price-to-earnings multiple of seven and a price-to-book value of 1.79 shows that the shares have an undemanding valuation. It is a cyclical business with some regulatory risk, so it may not be a perfect Warren Buffett stock, or indeed everyone’s cup of tea, but it does have decent revenue growth. It also has high margins and returns on equity that make me think it meets quite a lot of Buffett’s quality-focused investing criteria. For example, return on equity is 28%. I already own CMC Markets, a competitor, so I wouldn’t buy the shares, even though they seem to be a Warren Buffett-style of stock.

The next Warren Buffett stock is Somero Enterprises (LSE: SOM), which creates machines used in construction. It’s a niche business. There’s a risk a competitor could produce a better quality product, usurping Somero’s USP, which seems to be that its machines are more precise and higher quality than the competition. It does have the potential for global growth – though it has struggled in China, which is a setback. On the value front, its P/E is 19, while the EV to EBITDA, another important value-focused metric comparing the enterprise value to EBITDA, is seven, which is low and indicates good value. The group has a return on equity of 23%, and margins are high, so it has serious signs of being a high-quality share.

The shares have been falling, though, and clearly the P/E is higher than other UK shares. However, on other metrics, it does show value, as the low EV to EBITDA measure shows. Overall I expect the shares to grow as the company does well in the US. I’m seriously considering buying more Somero shares very soon.

The market dip

One last note is just to say that Warren Buffett is unlikely to be concerned by the recent stock market declines. He’s the consummate long-term investor. I have a strong feeling, that like other long-term investors, he’ll see shares falling as more of an opportunity than a disaster – as painful, and potentially scary, as it may feel right now.

Andy Ross owns shares in Somero Enterprises, Inc and CMC Markets. The Motley Fool UK has recommended Somero Enterprises, Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The stock market is struggling. This is particularly true in the US and among UK small-cap companies. As evidence of this, the UK All Share Index is down 9% this year so far. The AIM 100 is down 22%. The FTSE 100, with its bank and oil companies, is faring better. The terrible war in Ukraine, along with inflation and a cost-of-living crisis, presents an opportunity for my long-term portfolio.

Three of my five stocks to buy today

Boohoo and Finncap are two of my picks for top stocks to buy today. The former is well-known to most UK investors. The share price has been in freefall and, of course, could continue to fall. The price-to-earnings multiple has been coming down for much of the last 18 months or so. Yet the business itself is profitable, growing, and has added brands to its roster. It has much better margins than competitors like ASOS. The problem is investors don’t seem to like the sector anymore.

Finncap is a financial services company with solid fundamentals. For example, it has a strong operating margin that has jumped to 18.7% from 4.6%. That’s lower than earlier in the pandemic but the margin now is also higher than in 2019. Return on equity has also improved a lot in the last three years, to 29%. It was 16.4% in 2019.

The problem is, if 2022 sees a slowdown in IPOs and other fundraising activity, demand for finnCap’s services could melt away, which would hit its revenue and profits. This makes me a bit nervous.

Then there is Sosandar, another UK fashion retailer. It has a good level of management shareholding with the co-founder and joint CEO holding 5% of the shares. Sosandar recently said that revenue had soared in the three months ended 31 December, leading the group to a record quarterly performance. Revenues were up 122% year on year in the third quarter at £8.85m. This will move it towards profitability, which I think will make it seem like a much better investment. However, it could be hit by the general market downturn and investors shunning the e-commerce fashion sector. 

And the other two stocks

These two shares are more obvious beneficiaries of the immediate situation, although I do think they potentially also make for good long-term investments. The first is gas producer Serica Energy. The other is Sylvania Platinum. These resources companies both benefit from rising commodity prices. However, the shares could fall sharply if the war in Ukraine ends – although that seems increasingly unlikely. 

All five of these companies I’d be tempted to add to my portfolio. I think they are among the very best stocks to buy today. 

In the end, the current market turmoil is very likely just a blip. Over the long term, by picking great companies trading at reasonable valuations, it should be possible to make money on the stock market. That’s the upside of long-term investing. Hopefully these shares should all help with that and be much higher in five years time.

Andy Ross owns no share mentioned. The Motley Fool UK has recommended ASOS and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Key points

• In the annual report for the 12 months to 30 June 2021, losses widened from $2.26m to $5.16m
• The cash balance increased from $212,132 in June 2020 to $15.8m the following year 
• Helium has many commercial uses, including as a cooling agent in MRI scanners

Operating exclusively in Tanzania, Helium One Global (LSE:HE1) engages in the exploration of the noble gas helium. With many potential commercial uses, helium is one of the lesser-known commodities. The company is currently working on two projects, Eyasi and Balangida, and Rukwa. I want to know if I should buy at the current HE1 share price and add the firm to my long-term portfolio. Let’s take a closer look.

Recent results and the HE1 share price

Helium One is still a young public company. It only listed in December 2020. In the past year, the HE1 share price is up around 37%, and it currently trades at 10.5p. In its annual results for the 12 months to 30 June 2021, the firm reported a loss before tax of $5.16m. This was an increase from $2.26m the previous year. This is not unusual for an early-stage business, with significant funds required for exploration.

In the report, Chairman Ian Stalker stated the Rukwa project had “good quality reservoirs”. I will be watching closely to see how much helium it yields. It should be noted, however, that companies engaged in explorative operations carry the risk of yielding disappointing results, or even nothing at all.

On the other hand, the business carried out two fund raises in 2021, both of which were oversubscribed. These collectively raised around $21m. While this is positive news, I can’t help but feel there is further possibility of dilution, given the funding required for exploration.

Furthermore, the firm’s cash balance stood at $15.8m in June 2021. This was an increase from $212,132 the previous year. 

Searching for helium

It makes sense to briefly look at the commercial uses for helium, given this is the company’s only market. MRI scanners require helium as a cooling agent. In addition, it is essential for weather balloons, high-tech manufacturing, and in the digital revolution. What is also clear, according to the company, is that it is in short supply.   

In a 17 January 2022 operational update, the firm stated that it found “multiple additional surface helium anomalies”. In essence, this means that satellite technology detected the potential presence of helium in more areas of the project than originally thought.

The firm conducted this investigation over a 4,500-square-kilometre area. If helium is confirmed, therefore, I think this would have a very positive impact on the HE1 share price.   

While this is a company engaged in an interesting market, I won’t be speculatively buying at the current HE1 share price. I want to see solid results from future operational updates. I will watch progress very closely.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.