LONDON MARKET MIDDAY: Investors cheer dividend hikes and buyback plans

(Alliance News) - Stock prices in London were higher midday Thursday, as traders took heart from the latest batch of UK corporate updates, ahead of another key day of company earnings in the US as well, with Amazon among those reporting quarterly numbers.

In London, there were buybacks aplenty, with Royal Dutch Shell, Anglo American and BAE Systems announcing plans to repurchase stock. Income investors also got a boost, with Lloyds Banking and Rentokil Initial among those declaring interim payouts once again. Diageo, meanwhile, upped its annual dividend.

The FTSE 100 index was up 62.13 points, or 0.9%, at 7,078.76 midday Thursday. The mid-cap FTSE 250 index was up 36.87 points, or 0.2%, at 23,043.32. The AIM All-Share index was up 4.45 points, 0.4%, at 1,246.22.

The Cboe UK 100 index was up 0.8% at 704.76. The Cboe 250 was flat at 20,791.22, but the Cboe Small Companies was up 0.2% at 15,225.67.

The CAC 40 in Paris was up 0.7%, while the DAX 30 in Frankfurt was 0.5% higher.

"The UK market saw investors flock to stocks that would benefit from economic expansion, principally commodities producers and banks," AJ Bell analyst Danni Hewson commented.

Anglo American was among the best blue-chip performers in London, rising 4.8%. Alongside strong first half earnings, the miner set out plans to return USD2 billion to investors. It will buyback USD1 billion, and it declared a special payout of USD0.80 per share, equal to another USD1 billion.

Peers Rio Tinto and BHP rose 2.9% and 2.3% in a positive session for the mining sector.

Among energy companies, Shell's A stock rose 4.2% and its B stock was 4.5% higher, as the oil major also unveiled buyback plans. Shell is targeting USD2 billion in buybacks which it aims to complete by the end of 2021.

In addition, Shell rebased its second quarter dividend to 24 US cents, up 38% quarter-on-quarter. For the second quarter of last year, it had declared a 16 cents payout.

Shell's second quarter total revenue, so including joint-ventures, surged 90% to USD61.76 billion from USD32.49 billion. Shell posted pretax profit of USD4.13 billion, swinging from a USD23.91 billion loss a year prior.

Peer TotalEnergies rose 2.1% in Paris. It similarly posted strong second quarter earnings.

A barrel of Brent oil was changing hands at USD74.87 midday Thursday, up from USD74.62 at the London equity market close on Wednesday.

BAE Systems announced plans for a buyback amounting to up to GBP500 million. The London and Farnborough-headquartered security and aerospace company also said revenue in the six months to June 30 climbed 1.7% to GBP9.34 billion from GBP9.18 billion. Pretax profit jumped 67% to GBP1.15 billion from GBP689 million.

BAE raised its interim payout by 5.3% to 9.9 pence per share from 9.4p a year earlier.

"BAE is rewarding shareholders for sticking out the uncertainty that came with operating through a pandemic with a 5% dividend hike and GBP500 million buyback programme. The group fared better than most, maintaining its dividend and keeping debt in check, but the crisis dented demand for some of its commercial products which ultimately hit cash flow," Hargreaves Lansdown analyst Laura Hoy commented.

BAE's stock rose 3.1% in London.

Also upping its payout was brewer and distiller Diageo, whose stock was 1.8% higher midday Thursday. Diageo upped its annual dividend by 3.8% to 72.55 pence.

Rentokil rose 5.0%, the best FTSE 100 performer. The hygiene and pest control firm brought back an interim dividend with a 2.09 pence per share payout, after skipping a dividend in the first half of last year. It noted 2021's interim dividend is 28% higher than 2019's half-year payout of 1.51p per share.

Lloyds Banking resumed interim dividends as well, declaring a 0.67 pence per share payout, having not made one in the first half of 2020. The dividend is 18% higher than its 0.57p payout for the second half of 2020.

Lloyds followed peer Barclays in announcing a big improvement to second-quarter results. It also announced an acquisition to accelerate its push into wealth management.

Lloyds said it swung to a GBP3.91 billion pretax profit in the first half of 2021, from a GBP602 million loss a year earlier. The lender's net income rose 2.0% to GBP7.56 billion from GBP7.41 billion. Net interest margin was 2.5%, which it guided for the rest of 2021 as well.

Lloyds was boosted by an impairment credit of GBP656 million in the first half, following a GBP3.82 billion hit a year earlier.

In addition, Lloyds announced plans to acquire investment and retirement platform Embark Group for GBP390 million.

Embark, which will become part of Scottish Widows, brings GBP35 billion in assets under administration for 410,000 consumer clients. It has seven UK offices - in London, Bolton, Dundee, Edinburgh, Leeds, Leicester and Swindon - and includes the brands Advance, Horizon, Stocktrade, Vested and The Adviser Centre.

FTSE 250-listed investor Chrysalis said existing Embark shareholders will retain the company's Rowanmoor small self-administered scheme and self-invested personal pension administration businesses. Chrysalis shares were up 1.4%. Lloyds shares were 0.6% higher.

Adding to the positive investor mood music, Indivior announced plans for a USD100 million buyback. The opioid-addiction drug maker was among the best mid-cap performers, rising 3.5%.

The pound was quoted at USD1.3954 midday Thursday in London, up from USD1.3881 at the equity market close on Wednesday. The euro was priced at USD1.1873, up from USD1.1807. Against the yen, the dollar weakened to JPY109.85 from JPY110.09.

New York stock index futures were mixed. The Dow Jones Industrial Average was called up 0.4% and the S&P 500 up 0.2%, though the Nasdaq Composite was called down 0.1%.

The Nasdaq was called lower as tech stocks react to a small hint of a more hawkish stance by the US Federal Reserve.

"Markets are still digesting the Fed's hawkish hold; we believe that tapering and rate hikes will both happen sooner than the market expects," BBH Global Currency Strategy analysts commented.

Amazon becomes the last FAANG to report quarterly numbers on Thursday, after the New York market close, following results from Facebook, Apple, Neflix and Google, part of Alphabet. Amazon shares inched down 0.1% in pre-market trade.

Elsewhere in New York, Boeing shares were up 0.8% in pre-market trade. Shares in peer Airbus rose 4.1% in Paris after the aerospace firm said it bounced back strongly into profit in the first half of the year as aircraft deliveries rose.

Airbus posted a net profit of EUR2.2 billion for the first six months of 2021, compared to a loss of EUR1.9 billion last year as the airline industry was walloped by the Covid-19 pandemic.

Gold advanced to USD1,821.95 per ounce midday Thursday from USD1,800.47 late Wednesday.

Still to come, Thursday's economic calendar has German inflation at 1300 BST, followed by US initial jobless claims and a US GDP reading at 1330 BST.

By Eric Cunha; ericcunha@alliancenews.com

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