Price and Dividend Analysis Of FTSE 100 Companies

FTSE 100 Index

The FTSE 100 is a broader benchmark index of the London Stock Exchange.  The index is the portfolio of most highly capitalised 100 blue chip companies listed on the London Stock Exchange. The index itself represents an 80% market-capitalisation of the total companies listed on the London Stock Exchange.  The top five holdings of the index by market capitalisation are: Royal Dutch Shell Plc-B (LSE: RDSb), Royal Dutch Shell Plc-A (LSE: RDSa), Unilever Plc (LSE: ULVR), HSBC Holding Plc (LSE: HSBA) and BP Plc (LSE: BP) respectively.

Index Constituents Analysis

Financials have the higher weight on FTSE 100 index and holds 20% weightage in the broader index, followed by Oil & Gas (17%), Consumer Goods (16%), Consumer Services (10.6%), Basic Materials (9.3%), Healthcare (9.6%), Industrials (8.9%) and Utilities, Telecommunications and Technology sector combinedly holds around 10% weight in the broader index.

Dividend Yield Analysis

The average dividend yield of the FTSE 100 portfolio companies stood at 4.2%, which makes it lucrative from an income investors standpoint, also the index is offering highest dividend yield at the current trading level against its peer indices like S&P 500, Dow Jones Industrial Average,  CAC 40, and S&P/TSX Composite. However, there are many upside outliers which are offering substantially high dividend yield against the FTSE 100 and despite their shares have recorded significant rally at the LSE, i.e. Basic material company Evraz Plc (LSE: EVR) engaged in mining, steel and vanadium business, offering a dividend yield of 14.1% and on a year-to-date basis, the stock has delivered a price return of 33.0%, Persimmon Plc (LSE: PSN), a holding company with core interests in building houses across the UK, is offering a dividend yield of 12.1%, which is almost 2.8x of the average dividend yield of the FTSE 100 companies. Also, the stock is delivering a positive price return on a year-to-date basis.

However, there are many companies which are offering striking dividend yield, although their stock has not performed so well in the past one year. However, these could be a potential value investment opportunities for the investors, who wish to participate in the market which is offering many lucrative opportunities at a lower valuation, but don’t want to risk their principal amount against the market volatility. Some of these companies are, Centrica Plc (LSE: CNA), a utility business which supplies energy in the United Kingdom of Great Britain and Ireland, and North America, is quoting a dividend yield of 13.7%, which is approximately 3.2x of the FTSE 100 index average dividend yield. Although, shares of the CNA have contracted approximately by 35% on a year-to-date basis and around 26% in the past 13-weeks. Another one is Imperial Brands Plc (LSE: IMB), a tobacco business offering a range of cigarettes, cigars and focusing on their next generation e-cigarette products, is quoting a dividend yield of approximately 12%, which is around 3x of the FTSE 100 index average dividend yield. However, shares of IMB have plunged approximately 21.5% on a year-to-date basis.

However, there are many FTSE 100 companies, which have delivered decent price return over the last one year and offering quite a decent dividend yield at the current trading level. Some of these are i.e. National Grid Plc (LSE: NG), a United Kingdome headquartered utility group engaged in transmission and distribution of electricity  and gas across the UK and in the Unites States as well, have delivered a price return of approximately 10% on a year-to-date basis and trading at a dividend yield of 5.5%, which is approximately 1.3x of FTSE 100 companies average dividend yield, Aviva Plc (LSE: AV), a London headquartered financial services business and core areas of operation divided into segment like life insurance, general insurance and asset management services. On a year-to-date basis, shares of the Aviva Plc have delivered a price return of approximately 10.0% and quoting a dividend yield of 7.3%, which is 1.7x of the FTSE 100 average dividend yield, BP Plc (LSE: BP), a United Kingdom headquartered energy business with primary interests in exploration, refining and marketing of oil and gas. Its shares were up by approximately 11% on a year-to-date basis and offering a dividend yield of 5.8%, which is around 160 bps points above the average dividend yield of FTSE 100 Index, Phoenix Group Plc (LSE: PHNX), a London-based holding group with interests in management of closed life insurance and pension funds. Shares of PHNX have surged approximately by 22% on a year-to-date basis and despite a decent surge in the stock price, the group is offering an alluring dividend yield of 6.7%. The dividend yield of Phoenix Group Plc is around 250 bps points above the average dividend yield of the FTSE 100 index. British American Tobacco PLC (LSE: BATS), a London-headquartered tobacco and next generation e-cigarette products business, was quoting a dividend yield of 7.1% which was 290 bps above the average dividend yield of FTSE100 index and also delivered a stock price return of approximately 12.4% on a year-to-date basis.

Also, there a few companies, whose stocks have performed quite well at the London Stock Exchange and still quoting a decent dividend yield, i.e. Micro Focus International Plc (LSE: MCRO), a London-headquartered global software business. Its shares have zoomed at the LSE and on a year-to-date basis, shares of the MCRO have recorded a price return of approximately 52.6% and still offering a dividend yield of 5.1%. The stock is gaining traction from both income as well as from value investors as well. Another one is 3i Group Plc (LSE: III), a United Kingdom-based investment services provider, whose stock has delivered a price return of 42% on a year-to-date basis and offering a dividend yield of approximately 3.2% despite a strong rally its shares have recorded over a couple of past few months. Next Plc (LSE: NXT), a United Kingdom-headquartered apparel retailer business, whose shares have surged around 38% on a year-to-date basis and despite a huge rally in the stock price, its shares were quoting a dividend yield of 3.0%. Rio Tinto (LSE: RIO), a metal mining company based out in London, the UK. On a year-to-date basis, shares of the RIO have rallied approximately 28% and despite a decent rally in the stock price, it was offering a dividend yield of 4.9% respectively.

The stocks which we have discussed above are more of global companies and their revenue is diversified across many geographies of the world. However, ongoing trade quarrel between China and America and Sanctions imposed by the US on Iran, which could push oil prices up, would have a potential impact on these companies.

However, there are FTSE 100 companies which had slashed their dividend for FY19 i.e. Marks & Spencer (LSE: MKS), a general retailer based out in London, the UK. The group is running around 1,380 stores across the world, recently announced a 50:50 joint venture agreement with Ocado Group Plc, has reduced its dividend payment for the financial year ended March 31, 2019 to 13.9 pence per share against the dividend of 18.7 pence per share recorded in the year-ago period. Ordinary dividend per share was around 26% below the dividend paid in the same period of the previous financial year. Another one is Vodafone Group Plc (LSE: VOD), which had slashed its full year dividend for FY19 by 40% on a YoY basis. This was primarily because of plunging revenue, increasing spectrum costs and an acquisition made by the group costs them around £21bn.

As per latest reports published by some of the media houses, FTSE 100 could deliver a total dividend of £93.5 bn for the financial year 2020, which would be a 6.5% above the dividend paid in the FY19 and will again offer a plenty of opportunities for both the value and income investors.

FTSE 100 Index Performance

Daily price chart (as on June 27, 2019), before the market close. (Source: Thomson Reuters)

At the time of writing (before the market close, at 09:33 AM GMT), FTSE 100 index was quoting at 7,427.09 and added 10.11 points or 0.14% against the previous day closing price. The index has registered a 52w high of 7,790.17 and a 52w low of 6,536.53 and at the current trading level, the index was quoting around 4.6% below the 52w high trading level and approximately 13.6% above the 52w low trading level.

On a year-to-date basis, the index was up by 10.12%, however, on a YoY basis, the index has delivered a negative price return of 1.6%. At the current trading level, the dividend yield of the FTSE 100 index stood at 4.45% which was significantly above the dividend yield of its peer indices and around 5.2x of the UK 10-Year Bond Yield.

Also, at the current trading level, the index was quoting approximately 4% above the 200-day Simple Moving Average Price, which indicates the index carrying potential to move up further from the current trading level.

*All figures have been taken from Thomson Reuters.