The FTSE 100 — the London stock market’s main index — is having a hard time. It’s down 2.7% so far in 2024, as well as losing 3% of its value over one year. However, over five years, the elite index is ahead by 10.6%. By the way, all these figures exclude cash dividends.
What’s holding the FTSE 100 back?
As I write, the entire index is worth around £2trn. Thus, with 100 companies in it, the mean average market size of a Footsie firm is roughly £20bn. However, the index’s weakness seems to be caused by its biggest beasts.
Right now, the 10 largest FTSE 100 firms range in market value from £51.8bn to a whopping £162.1bn. And the combined market cap of these leaders comes to £934bn. Therefore, close to half — 46.7% — of the index’s value comes from just 10 mega-cap stocks.
The Footsie’s five flops
Looking deeper, I found five mega-cap companies whose sliding share prices appear to be holding back the entire London market. Here are these five laggards and losers, listed by market value from largest to smallest:
| Company | Business | Market value | Share price | One-year change | Five-year change |
| Rio Tinto | Mining | £93.6bn | 5,487.0p | -12.6% | +41.5% |
| Unilever | Consumer goods | £92.9bn | 3,719.5p | -9.3% | -6.4% |
| BP | Energy | £77.3bn | 452.1p | -4.9% | -10.8% |
| Diageo | Drinks | £60.2bn | 2,693.0p | -27.0% | -0.9% |
| British American Tobacco | Tobacco | £51.8bn | 2,316.5p | -25.1% | -3.2% |
Collectively, these five fallers are currently valued at £375.9bn, which is around 18.8% of the entire FTSE 100. All five stocks have declines over the past year, with losses ranging from nearly 5% to 27%.
The loss of market value at these five firms over the past 12 months ranges from £4bn at oil & gas major BP to £22.2bn at alcoholic-drinks giant Diageo. Overall, these five stocks have shed £66.6bn of shareholder wealth over the past year. That’s more than 3.3% of the entire FTSE 100,
What’s more, all but one of these shares have lost ground over the past five years. The exception is mega-miner Rio Tinto, whose shares have climbed by more than two-fifths in the last half-decade.
Bad news for me
For the record, my wife and I own stakes in all but one of these firms, the exception being tobacco firm British American Tobacco. I’m a smoker, but my wife hates this habit, so she doesn’t allow tobacco stocks in our family portfolio.
Even worse, several of these shares have recently hit 52-week lows, dragging down the value of our portfolio. Then again, we bought our stakes in these companies for their generous shareholder dividends.
At present, dividend yields from these five shares range from 3% to 9.8% a year. The average cash yield across all five comes to 5.5% a year. This comfortably beats the Footsie’s yearly cash yield of 4%.
Even better, each of these FTSE 100 firms returns billions of pounds in cash each year to their owners. Hence, my wife and I will use our stream of steady dividends to buy yet more shares while prices are depressed. A decade from now, I expect to be richer as a result of this patient, long-term approach to value creation!
