LONDON -- The FTSE 100 is up 5.7% in the last year. While that is a respectable return, you would have done even better if you had bought a clutch of these shares.
My list is dominated by the banks. Anyone who stayed invested in the sector throughout the eurozone gloom has been well-rewarded for their bravery and patience.
Below are the 10 largest companies in the FTSE 100 that are trading within 3% of their high for the year.
|
Name |
Price (pence) |
P/E (forecast) |
Yield (forecast) |
Market Cap (millions of pounds) |
|---|---|---|---|---|
|
HSBC Holdings |
635 |
11.2 |
4.3% |
116,776 |
|
Unilever |
2,409 |
18.9 |
3.3% |
68,241 |
|
Diageo |
1,860 |
18.1 |
2.6% |
46,646 |
|
SABMiller |
2,835 |
19.1 |
2.2% |
45,209 |
|
Royal Bank of Scotland |
295 |
17.1 |
0% |
33,464 |
|
Lloyds Banking |
46.5 |
18.6 |
0% |
32,841 |
|
Reckitt Benckiser |
3,926 |
15.9 |
3.3% |
28,264 |
|
National Grid |
702 |
12.8 |
5.8% |
25,521 |
|
Prudential |
911 |
13.3 |
2.9% |
23,291 |
|
Carnival |
2,515 |
21.6 |
2.5% |
19,551 |
Source: Stockopedia.
Four companies stood out in particular.
1. Diageo (DGE 0.47%)
Shares in this megabrewer are trading near an all-time high. Diageo is one of the most successful companies you can buy shares in today. The manufacturer of Guinness and Smirnoff (among others) managed to increase earnings per share and dividends throughout the financial crisis.
Success like that will always inspire investor confidence and attract a premium rating. With 102.9 pence of EPS forecast for 2013, rising to 115.2 pence the year after, Diageo is priced significantly higher than the average FTSE 100 stock. With an expected yield of 2.6%, there are clearly many better income opportunities available.
In the last five years, Diageo has increased its profit at an average rate of 14% per annum. Dividends have been raised at an average of 5.9% per annum.
2. Unilever (ULVR 0.76%)
Like Diageo, Unilever is a big-brands company. Unilever is the company behind household brands such as Pot Noodle, Marmite, Persil, and Lynx. In fact, there can be very few people in the U.K. who don't regularly purchase at least one Unilever product.
These brands and product diversity have helped Unilever build a business with high earnings reliability. Investors will frequently pay up for such quality earnings.
Unilever has a bigger yield than Diageo. The payout is forecast to hit 3.3% this year, rising to 3.5% in 2013. The forecast growth, however, is less than you might expect from a company with such a high P/E. Brokers actually forecast a small decline in earnings this year, to be followed by an 8.1% rise in EPS for 2013. Decent dividend growth is still expected, and analyst consensus calls for a 7.1% rise in 2012, to be followed by another 6.7% increase in 2013.
3. SABMiller (LSE: SAB)
The SABMiller portfolio includes Peroni, Grolsch, and the eponymous Miller Genuine Draft, among others.
At SABMiller, EPS has increased by an average of 12.8% a year for the last five years. In that time, the dividend has been increasing by an average of 12.7% per annum.
The reliability of SAB's sales and profit make it a highly desirable investment both for equity and debt investors. Last week, the company successfully raised 1 billion euros of debt by issuing an eight-year bond. The interest SABMiller will be paying on this new debt is just 1.875% -- the sort of lending rate most listed companies could only dream of paying.
4. Prudential (PRU 1.79%)
General insurer Prudential has a large presence in Asia. It's likely this positioning of the business has helped Prudential manage the downturn so well.
Although the company reported a loss for 2008, profit is now well ahead of where it was before the crisis. Dividends have been rising every year since 2005. In the last five years, the payout has increased at an average of 8% per annum. Looking at the forecasts, Prudential is expected to report 18.3% higher EPS in 2012 and carry on growing in 2013. This means that the shares trade on a 2013 P/E of 11.9.
As the share price growth has been so strong, the dividend yield has fallen. That payout is expected to continue rising. Consensus is for a 5.1% increase for 2012, to be followed by a 10.4% advance in 2013.
5. Reckitt Benckiser (RKT 0.76%)
Reckitt Benckiser has a fantastic growth record. This household-products company has managed to increase both EPS and dividends for the last five years. The company also managed these increases at a fast clip: The lowest EPS growth rate in that time was 6.6%, and the lowest dividend increase was 5%. Few listed companies can demonstrate such a successful track record.
Reckitt has managed this by nurturing a stable of leading brands such as Cillit Bang, Nurofen, and Vanish. By owning these leading brands, Reckitt has superior pricing power and operating margins.
However, there is some skepticism as to whether the company can continue to grow at the same rate. Consensus calls for EPS to decline slightly this year before returning to only marginal growth in 2013. Dividend growth is also expected to moderate, with a 2.8% rise expected in 2012, followed by a 3.3% increase in 2013.
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