I have written about returns for stocks on a general basis in the Long Term View series of posts and the Long VS Short series but in this series, Share Investor's Total Returns, I will be giving my actual returns for stocks in the Share Investor Portfolio for as long as I have held them.The return calculation will include dividends earned along with qualifying tax credits and of course any capital increase in the share price. It will be a total return over the length of holding of the share expressed in overall dollar figures with an individual value per share of what the stock currently is held at.
The second stock in this particular series is the capital returns star of the portfolio and one that I have held for 4.5 years, Mainfreight Ltd [MFT.NZX].
The current holding of 5000 shares was kicked off by an initial purchase of 3000 in November 2006 and 32 other purchases, the latest in July 2009.
The stock cost a total of $32768.75, it has returned net dividends of $3743.31 and total tax credits of $1771.40, with $152.00 in brokerage.
I am eligible for the full tax credit so if the gross dividend (net dividend plus tax credits)is added and brokerage taken off my full return over the total holding period of 4.5 years is $5362.71
The current capital value of the company in the Share Investor Portfolio as at 6 May 2011 is $45800. The capital gain therefore is $13031.25. This gives a total return on this share of $18393.96. This is a 56% return over 4.5 years or 12.44% net per annum.
I hold MFT therefore at a total cost of $14374.79 or $2.87 per share.
Disc: I own MFT shares in the Share Investor Portfolio
Share Investor's Total Returns Series
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Hi Darren,
ReplyDeleteOne thing which you don't seem to take into account is the use of the dividend payments. You are adding them in at the end as though it was a single payout. This makes high dividend payment companies appear to give less returns than a growth company.
For example, invest some money for 5 years in two companies, A and B. Company A pays $1000 dividend each year, whereas company B has a capital gain of $1000 each year. In your analysis these would be equivalent with a $5000 profit in each case. But the money returned by company A could be invested returning 10 years of return (4 years for the first $1000, 3 years for the next $1000, etc, and 4+3+2+1 = 10). If this were invested at a 5% return, then that would be $500 profit (10 years at $50 per year) even without taking compounding interest into account. So this would add an extra 10% onto your returns for company A, compared to company B.
Cheers,
Brent.
Hi Brent, this series of posts is just supposed to show total returns for stocks in the portfolio, including dividends, tax credits and any capital gain or loss to date.
ReplyDeleteIn my portfolio, the cash dividend in practice is either used to buy other stocks or stays in cash.