Just a few years ago, investors were writing off the FTSE 100. They said Britain’s blue-chip index couldn’t compete with the growth-hungry S&P 500. Nobody is writing off the FTSE today.
It was an understandable argument, but based largely on one sector: US technology. The ‘Magnificent Seven’ tech mega-caps have changed the world but now the FTSE 100 is showing what it can do too.
British shares fight back
Over the past year, the FTSE 100 has risen a solid 15%, while the S&P 500 grew roughly 16%. Given that the FTSE 100 index yields just over 3%, and the US around 1%, they’re neck and neck.
As markets worry about the hundreds of billions being poured into AI infrastructure, investors are looking beyond US tech and finding plenty to like over here.
The FTSE 100 has one obvious advantage: dividends. Investors can find plenty of companies offering generous yields, including Legal & General, M&G and LondonMetric Property, all of which have yields around 7%.
Banks, insurers, wealth managers, oil companies, tobacco stocks and real estate investment trusts all offer high income opportunities. They may lack the glamour of big tech, but their dividends can make a huge difference to long-term returns.
The power of dividends
Over five years, the FTSE 100 has risen roughly 50%, while the S&P 500 has climbed around 70%. But those figures ignore dividends. I asked ChatGPT to calculate what £10,000 invested five years ago would be worth today, with dividends reinvested.
It said the FTSE 100 tracker would have grown to around £17,700, while the S&P 500 equivalent would be worth approximately £18,850, assuming sterling returns. The US still wins, but it’s closer than the hype suggests.
Past performance doesn’t guarantee future returns. But the FTSE 100 deserves more respect than it often gets.
Don’t overlook growth
Britain also has some terrific growth stocks. Rolls-Royce has soared around 862% over five years, while Lion Finance Group (LSE: BGEO), formerly Bank of Georgia Group, has rocketed 725%.
Lion Finance operates mainly in Georgia and Armenia, providing retail and business banking, payments, wealth management and investment services. Its shares have been lifted by strong economic growth in both countries, expanding lending and impressive profitability. First-half 2026 profits (11 August) climbed 17.3% year on year to £411m.
Its shares still look cheap, trading on a price-to-earnings ratio of 9.2. The yield is a relatively low 2.8%, but that’s down to all that growth. Shareholder payouts have increased at an average rate of 50% annually over the last five years.
Lion is a riskier proposition than, say, Lloyds or NatWest. Political instability, regional tensions and economic shocks could hit its markets and damage loan quality. After its incredible run, the shares may slow. On the plus side, its digital banking strengths, increasing customer base and expansion in Armenia offer further growth potential.
I think Lion Finance is worth considering for investors comfortable taking on more risk. If I didn’t already have outsized exposure to FTSE 100 banks, I’d be tempted.
Britain’s stock market has more going for it than the doubters admit. Investors should check out these home-grown stocks too…
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Harvey Jones owns shares in Lloyds, NatWest and Rolls-Royce.
This story originally appeared on Motley Fool
