LONDON -- Fears of a eurozone collapse appear to be receding. In the U.K., more commentators are beginning to talk up the economy. The effect on the U.K. stock market is clear: The FTSE 100 is up 13.3% in the last 12 months.
I trawled the market for blue-chip shares trading within 3% of their high for the year. The companies below are the 15 largest close to a high.
Price (in pence)
Yield (Historic, %)
% Price Change, 1 Year
Market cap (in millions of pounds)
|J Sainsbury (LSE: SBRY.L )||347||4.6||26.9||6,544|
|Ryanair Holdings (LSE: RYA.L )||1396||0.0*||36.4||5,148|
|Rexam (LSE: REX.L )||435||3.3||39.7||3,815|
|Aberdeen Asset Management (LSE: ADN.L )||310||2.9||75.3||3,563|
*A special dividend is scheduled.
Four stood out in particular:
1. Aberdeen Asset Management
I've long regarded fund management companies as a geared play on the stock market. When the market does well, assets under management rise, and fees rise with them. Successful markets then attract new money and revenues begin to rise fast. When markets fall, this process goes into reverse.
In the last year, shares in Aberdeen Asset Management have surged 84.6%. The effect of rising stock markets on Aberdeen's profitability is clear: Earnings per share has more than doubled since the market lows of 2008. Since then, the shares have risen fourfold.
A recent trading statement from the company revealed a small increase in assets under management. Aberdeen is expected to deliver a 28% rise in EPS for 2012. This is forecast to be matched by a 15.8% increased dividend.
Aberdeen currently trades on 14.5 times the consensus forecast EPS for 2012. More growth is expected in 2013, meaning the price-to-earnings ratio falls to 12.7. Full-year results are expected on Nov. 26.
2. J Sainsbury
In May, Sainsbury's reported it had a 16.6% share of the U.K. grocery market. This is Sainsbury's strongest market position in a decade.
Investors have woken up to the progress that the company is making: The shares are up 30.5% in the past year. By comparison, rival Tesco is down 9.1%.
Sainsbury's non-food business has been growing faster than its food operations. Online food sales are also growing fast: up 20% in the last year. Sainsbury's is now the U.K.'s second-largest online food retailer.
Sainsbury's has been a popular income investment in recent years. However, the share price rise has pushed that dividend yield down. On 2013 forecasts, Sainsbury's shares are expected to yield 4.75%. This is a small rise on the 2012 payout. Analysts expect earnings to rise for the next two years. The trouble is, 12 months ago they said the same thing about Tesco...
Ryanair is famous for its low prices and controversial advertising. Its CEO, Michael O'Leary, has built Ryanair into one of the world's largest airlines.
Ryanair has implemented a number of innovative strategies to lower basic air fare costs -- which has frequently led to friction with customers. Management continues to pursue further economies unabashed. The company's attitude to its customers is perhaps best summed up in Mr. O'Leary's words as "the customer is nearly always wrong."
It is not just budget flyers that have benefited from Ryanair's growth. The company has declared two special dividends to shareholders in recent years. The next is due in November at 0.34 euros.
However, Ryanair competes hard in an industry that is notorious for destroying shareholder value. I also worry that regulators view the industry as one to tax increasingly.
Analysts forecast profits to continue at around the same level for the next two years.
Rexam is a provider of packaging, mostly to the soft drinks industry.
In the 10 years from 1998 to 2008, the company increased its dividend year on year. This changed in 2009, however. Following a rights issue, Rexam canceled its interim dividend; payments were restored in 2010. Dividend increases have since recommenced but from a lower level. Rexam is forecast to pay 15.2 pence per share of dividends for 2012. This is only slightly ahead of what the company paid in 2001.
Just as dividend growth returned after the 2009 rights issue, so has earnings growth. Earnings per share has nearly doubled since the low for 2009, and more growth is expected. Consensus estimates are for Rexam to grow EPS by 2.9% for 2012 and 12.2% the year after.
Rexam's most recent trading statement reported a 6% dividend increase despite challenging markets. Rexam also announced the sale of its personal care business for 452 million pounds. This will result in 350 million pounds being returned to shareholders.
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