The FTSE 100 has a reputation for being a bit of a plodder. Given that it’s up just 30% in 10 years, that’s understandable.
However, if we also include reinvested dividends, the total return would be 82% over the same period, according to Vanguard. That’s a much more respectable return.
So far in 2024, the index is up around 6.4%, meaning it’s on course (with dividends) to slightly outperform its 8% historical average. But a handful of FTSE 100 shares certainly aren’t following this single-digit return script. Here are two that are up way more than the average this year.
+39.3%
First up is Marks and Spencer (LSE: MKS). The stock is up nearly 40% year to date and has now more than doubled over five years.
Following previous turnaround failures, this management team is trumpeting a “new M&S“. Last year, sales jumped 9.4% to £13.1bn, with both food and clothing segments performing strongly. Operating profit surged 34% to £848.6m.
The company has improved its value proposition with its “Remarksable” range, which is attracting more family households (more groceries) doing the weekly shop. Importantly though, the brand is still retaining its core, more affluent customer base.
One risk here is its joint venture with Ocado, which has struggled to turn a profit. There have been reports of tensions in this online grocery partnership. Clearly, this isn’t ideal and worth keeping an eye on.
That said, Ocado was the fastest growing grocer for the eighth month running in September, according to industry data from Kantar. Perhaps this is helping boost the M&S share price too.
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 on 31 March), the price-to-earnings (P/E) ratio is 14.3. This drops to 13.2 with next year’s forecast. Neither multiple appears stretched.
The company has also restored its dividend and the forward yield is 1.9%. If I were looking to invest in a supermarket stock, I’d consider Marks and Spencer.
+76%
The second stock that is demolishing the FTSE 100 (again) is Rolls-Royce (LSE:RR). It’s up 76% year to date, taking the three-year return above 250%.
Like M&S, the firm is a couple of years into a successful turnaround under new management. Profits are up, margins are expanding, and net debt is down. The dividend is also back.
More recently, Rolls’ small modular reactor (SMR) unit has been gathering attention. In a landmark announcement in September, the Czech Republic’s state utility, ČEZ Group, chose it as the preferred supplier for its mini-nuclear reactor programme. Its SMR technology has also advanced to the next stage of the UK’s selection process.
Despite an expected price tag of around £2bn each, these factory-built reactors could see massive demand as governments push toward achieving net-zero emissions by 2050. Consequently, it’s tipped to become a $295bn industry by the early 2040s.
However, this SMR division also reportedly lost £78m last year and will need fresh injections of cash by Q1 of 2025. So there’s risk too, especially if the UK’s selection process drags on much longer.
I invested in Rolls-Royce at a much lower price a couple of years back. I’m happy to keep holding my shares.
