Since mid-2012, U.K. earnings on a trailing basis have declined about 50% but trailing dividends per share have increased 20%, causing the payout ratio to rise to 90%, the highest in 50 years.
“British stocks, specifically, experienced an immediate about-face and began to shoot higher. As we mentioned in an August post, 7 weeks after the Brexit vote, U.K.’s FTSE-100 stock index had actually climbed 20%. It wasn’t just a flash-in-the-pan move either. After pausing at some technical resistance outlined in that August post, the index has once again continued to press higher, now some 23% above the Brexit lows,” according to See It Market.
Related: Don’t Fight the Charts on the British Pound ETF
There are options for investors looking to play U.K. stocks benefiting from the weaker pound, including the Deutsche X-Trackers MSCI United Kingdom Hedged Equity ETF (NYSEArca: DBUK), iShares Currency Hedged MSCI United Kingdom ETF (NYSEArca: HEWU) and the iShares Currency Hedged MSCI United Kingdom ETF (NYSEArca: HEWU).
“The FTSE also managed another technical accomplishment. It reclaimed the top side of the key post-2011 Up trendline that it had broken in August 2015. Considering all the major lows between 2011-2015 that precisely held the trendline, as well as the fact that the FTSE continues to “respect” it, we are hesitant to dismiss the potential usefulness of the old trendline,” adds See It Market.