How the FTSE 100's Dividends Have Performed Since the 1999 Market Top

LONDON -- I'm sure most of you will know the last decade or so has not been great for the FTSE 100 (FTSEINDICES: ^FTSE  ) index.

The grim news is essentially that London's benchmark index reached 6,930 on the final trading day of 1999 -- and has traded below that level ever since. Indeed, the 2000 to 2003 dot-com crash and the 2007 to 2008 banking collapse both saw shares in general lose 50% of their value. And the FTSE has actually spent more time below 5,000 than it has above 6,000 after reaching the peak.

Still, there is hope. You see, by my calculations, the FTSE 100 index today is paying 56% more in the way of dividends than it did at the top some 13 long years ago.

Here is an interesting chart:

Source: Bloomberg; Financial Times.

The black line shows the performance of the FTSE 100 (values on the left-hand axis), while the blue bars represent the FTSE 100's dividends expressed as FTSE points (values on the right-hand axis).

I've calculated the FTSE 100's dividends by multiplying the level of the index by the quoted yield at the end of every month and again for the end of last week. The table below shows "dividend-point" values in the chart at FTSE 100's peak and for last week:

Date

FTSE 100

Yield

Dividend Points

Dec. 31, 1999

6,930

2.04

141

Jan. 18, 2013

6,154

3.57

220

Looking at the chart, it seems the progression of blue-chip dividends has been somewhat less volatile than the actual index. Advancing from 141 to 220 points during 13 years is equivalent to 3.5% a year. However, my figures do show dividend points sliding 25% from 235 to 177 between July 2008 and September 2009.

I'm not sure which companies contributed to the dividend spike during the first half of 2008, but the chart suggests many blue chips may have been a bit overenthusiastic with their payouts just months before they rushed to hoard cash as the banks collapsed!

My chart also suggests that buying the FTSE 100 when the black line is well below the blue bars -- and not buying when the black line is well above the blue bars -- can be a worthwhile investment strategy. Although such a strategy hasn't been perfect all of the time, it does indicate that an FTSE 100 that's currently approaching 6,200 is neither a bargain buy nor a stand-out sell.

So perhaps the recent market rally -- which has seen the FTSE 100 jump more than 500 points in two months -- may be about to pause for breath.

Of course, there are always individual shares out there that can provide handsome gains whatever the FTSE 100 and total corporate dividends are doing. If you're seeking some suggestions for potential winners, this free report identifies many blue-chip stocks that boast yields well in excess of the 3.57% market average, as well as illustrious track records to show they have proved themselves to investors over time. You can download these special blue-chip ideas to help your portfolio beat the FTSE by just clicking here -- the report is free and comes with no further obligation.

In the meantime, I, for one, shall be keeping my fingers crossed that dividends from the FTSE 100 can continue to march higher -- and that one day the blue-chip index sets a new all-time high!


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