FTSE 100 round-up: special dividends, upgrades and defensive winners

Our City writer looks at the winners and losers on another difficult day for blue-chip investors.

Hopes of another special dividend fired B&M European Value Retail (LSE:BME) sharply higher today in a blue-chip session that saw BP (LSE:BP.) shares at their cheapest level since last autumn.

The FTSE 100 index declined 1.4% on Tuesday and stayed in the red this afternoon after the latest signs of weakening momentum in China fuelled worries over the global outlook at a time when businesses and consumers are still squeezed by high interest rates.

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Brent crude futures fell as far as $71.48 at one point today, with a subsequent recovery back to $73 a barrel still leaving the benchmark down by almost 10% across May.

Speculation now turns to whether Opec+ ministers will decide on another production cut at their meeting on 4 June in an effort to shore up the price.

The developments meant BP shares fell 15.35p to 451.25p, having been at 534p prior to first quarter results at the end of April. Shell (LSE:SHEL) also weakened by 48p to 2,234p, alongside Asia-focused stock Burberry (LSE:BRBY) after softer-than-expected May manufacturing data weighed on China risk sentiment.

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The PMI reading softened to 48.8 in May, well below the consensus forecast of 49.5 and marking the second straight month in contractionary territory below the 50 line.

Both new orders and production showed weakness, with still-soft export and import orders pointing to weak external and domestic demand.

UBS Global Wealth Management said today: “The May PMIs underscore an increasingly uneven recovery in China, with manufacturing slowing and industrial momentum weakening even as the services recovery rolls on.”

Defensive stocks including AstraZeneca (LSE:AZN) and Rentokil Initial (LSE:RTO) offered some protection for investors today, as did Scottish Mortgage (LSE:SMT) Investment Trust amid the benefit of Wall Street’s recent AI-led tech sector revival.

The Baillie Gifford trust, whose joint largest holdings at 7.8% are the semiconductor industry supplier ASML (EURONEXT:ASML) and biotech Moderna (NASDAQ:MRNA), is trading at its highest level since the end of March.

Others on the risers board included SSE (LSE:SSE) after Bank of America upgraded its price target on the renewables energy giant to 2,150p following last week’s results and strategy update. SSE’s plans included a 40% boost to its spending on net-zero projects up to 2027.

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The bank’s analysts said a forward multiple for SSE of 9.4 times, which compares with a 10-year average of 12.7x and integrated peers on 11x, still looks undemanding.

They noted that the City’s consensus earnings per share forecast is between 20-30% below the company’s 2027 guidance range. The bank said: “We expect positive earnings revisions to be the main catalyst for continued share price re-rating.”

Bank of America also upgraded its target price on B&M after the discount retailer posted adjusted earnings of £573 million compared with a pre-Covid level of £342 million.

The company also guided to further growth in the new financial year, having achieved a stronger-than-expected UK like-for-like sales rise of 8% in the first nine weeks of the period.

The bank’s analysts raised their 2024 earnings forecast by 6% and now assume another 20p special dividend in line with the one paid to shareholders in January of this year.

They reiterated a “buy” recommendation with a new target of 605p, which compares with this afternoon’s one-year high for shares of 511p after a rise of 39.1p.