A year ago…

Tuesday, Aug 11 2015 by

Last summer UK investors were nervous about the outcome of a Scottish Referendum and the General Election but were enjoying the benefits flowing from oil and iron ore both trading at over $100 a barrel and a tonne respectively. One year on political uncertainty has been eliminated but both those commodities are trading at half the levels they were and yet the stock market is little changed, down just 2% over the year.

And it is not just commodities that have been repriced. Sterling is now trading at 1.56 to the dollar whereas a year ago it was worth 10 cents less. That 6% appreciation has a major impact on UK businesses that have a sterling cost base yet a revenue stream largely denominated in dollars. This has hurt revenues and margins for many mid-sized British businesses as evidenced by some interim trading updates released over the summer.

These changes might be expected to have a significant impact yet, rather oddly, the shape of the UK stock market has not changed dramatically. HSBC is still the largest company by market capitalisation and also by its share of forecast dividend payments, despite the gyrations of the Chinese stock market. It is followed by the combination of Shell A & B shares and then BP. This is even after the 26% fall in the Oil & Gas Producers sector in the last twelve months.

More change has occurred lower down the list where, for example, Lloyds Banking Group has moved up from the 13th to 7th largest dividend payer as it has returned to making distributions. Interestingly, the opprobrium that still taints bank shares means that its popularity, as measured by market capitalisation, means it still ranks below its importance as a dividend payer. Measured by price it accounts for 2.25% of the index even after its 13% rise over the year, while measured by dividends it is 3.22%. That difference of almost one percentage point is more significant than it might seem as there are only 24 companies that have a total weight of more than 1% when measured by price and 23 when measured by dividends.

Perhaps more surprising is that the expectations of future dividends have actually increased over the twelve month period despite the adverse effects of lower commodity prices and unfavourable exchange rates. In the…

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Past performance is not a guide to future returns. The value of investments and the income from them may go down as well as up and is not guaranteed. An investor may not get back the amount originally invested. For risks relating to specific products, please refer to the relevant documentation for that product.

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The Royal Dutch Shell plc explores for crude oil and natural gas around the world, both in conventional fields and from sources, such as tight rock, shale and coal formations. The Company's segments include Integrated Gas, Upstream, Downstream and Corporate. The Integrated Gas segment is engaged in the liquefaction and transportation of gas and the conversion of natural gas to liquids to provide fuels and other products, as well as projects with an integrated activity, ranging from producing to commercializing gas. The Upstream segment includes the operations of Upstream, which is engaged in the exploration for and extraction of crude oil, natural gas and natural gas liquids, and the marketing and transportation of oil and gas, and Oil Sands, which is engaged in the extraction of bitumen from mined oil sands and conversion into synthetic crude oil. The Downstream segment is engaged in oil products and chemicals manufacturing, and marketing activities. more »

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BP p.l.c. is an integrated oil and gas company. The Company owns an interest in OJSC Oil Company Rosneft (Rosneft), an oil and gas company. The Company's segments include Upstream, Downstream, Rosneft, and Other businesses and corporate. The Upstream segment is engaged in oil and natural gas exploration, field development and production, as well as midstream transportation, storage and processing. The Downstream segment has global manufacturing and marketing operations. The Rosneft segment has a resource base of hydrocarbons onshore and offshore. The Other businesses and corporate segment comprises the biofuels and wind businesses, shipping and treasury functions, and corporate activities around the world. The Company provides its customers with fuel for transportation, energy for heat and light, lubricants to keep engines moving and the petrochemicals products used to make everyday items as diverse as paints, clothes and packaging. more »

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Lloyds Banking Group plc is a provider of financial services to individual and business customers in the United Kingdom. The Company's main business activities are retail and commercial banking, general insurance, and long-term savings, protection and investment. The Company's segments are Retail, Commercial Banking, Consumer Finance, Insurance and Other. The Retail segment offers a range of financial service products, including current accounts, savings and mortgages. The Commercial Banking segment offers a range of products and services, such as lending, transactional banking, working capital management, risk management and debt capital markets services. The Consumer Finance segment offers consumer lending products, including motor finance, credit cards, and unsecured personal loans. The Insurance segment provides a range of protection, pension and investment products. Its brands include Lloyds Bank, Halifax, Bank of Scotland, Scottish Widows, Colleys, Lex Autolease and AMC. more »

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