Image source: M&S Group plc
I FTSE 100 he has a reputation for being a bit of a plodder. Considering that it has increased by 30% in 10 years, that is understandable.
However, if we also include reinvested dividends, the total return would be 82% over the same period, according to Vanguard. That is a very respectable return.
So far in 2024, the index is up about 6.4%, which means it's on track (in dividends) to slightly exceed its historical average of 8%. But a number of FTSE 100 stocks are not following this single-digit return script. Here are two that rose above the average this year.
+ 39.3%
First of all Marks and Spencer (LSE: MKS). The stock is up nearly 40% year to date and has now more than doubled in five years.
Following the failure of the previous change, this management team proposes “the new M&S“. Last year, sales jumped by 9.4% to £13.1bn, with both the food and clothing sectors performing strongly. Operating profit increased by 34% to £848.6m.
The company has developed its value proposition “It is remarkable” wide, which attracts many families (lots of groceries) who do the weekly shop. Importantly though, the brand still retains its ultra-rich customer base.
Another risk here is its joint venture Ocadohard to find profit. There have been reports of tension in this online grocer's relationship. Obviously, this is wrong and deserves attention.
That said, Ocado was the fastest growing retailer for the eighth month in September, according to industry data from Kantar. Perhaps this helps boost M&S's share price again.
Despite its strong performance, the stock still looks reasonably priced to me. Based on this year's earnings forecast (Marks and Spencer's financial year ends 31 March), the price-to-earnings (P/E) ratio is 14.3. This drops to 13.2 for next year's forecast. Not much appears in the stretch.
The company has also returned its dividend with an annual yield of 1.9%. If I were looking to invest in a supermarket stock, I would consider Marks and Spencer.
+ 76%
The second stock to break the FTSE 100 (again) is Rolls-Royce (LSE:RR). It's up 76% year to date, taking a three-year return of more than 250%.
Like M&S, the company has had a successful few years of transformation under new management. Profits are up, margins are up, and total debt is down. The dividend is also back.
Recently, Rolls's small modular reactor (SMR) unit has been gathering attention. In a landmark announcement in September, the Czech Republic's state apparatus, ČEZ Grouphas selected it as the preferred supplier for its mini-nuclear reactor program. Its SMR technology has also progressed to the next stage of the UK selection process.
Despite an expected price tag of around £2bn each, these factory-built devices could see huge demand as governments aim to achieve net-zero emissions by 2050. Therefore, it is projected to become a $295bn industry by the early 2040s.
However, the SMR division reportedly made a loss of £78m last year and will need fresh cash injections in Q1 2025. So there are risks, especially if the UK selection process takes too long.
I invested in Rolls-Royce at a very low price a few years ago. I am happy to continue holding my shares.
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