I’ve been looking at the total returns made by some of our top FTSE 100 companies recently, and it was quite a shock to see the 65% loss that a Lloyds Banking Group investment would have made with all dividends reinvested.
That made me wonder how the other banks, the ones that didn’t need a taxpayer bailout, would have fared, so I’ve been doing the sums for Barclays (LSE: BARC) (NYSE: BCS.US), too. Although there was no bailout, Barclays has suffered a number of penalties due to past misdeeds and there are fears there may be more to come — and that will be depressing the price today.
A 54% slump!
If you’d bought Barclays shares at the end of September 2004, you’d have had to pay 490p apiece for them. And a couple of years later, with the price hovering around 620p, you’d probably have been feeling pretty pleased with yourself — especially as you’d have had a couple of years of 5% dividend yields lining your pockets too.
But that would have been the end of the happy days, and by 2011 your shares would have crashed to under 140p and dividends would have been slashed.
The price has recovered since then to 226p as I write, but that’s still a loss of 54% over 10 years — £10,000 invested in 2004 would be worth only £4,612 now.
The dividend situation at Barclays turned pretty desperate, but you would still have had some cash to help counter your capital loss a little — £3,047, in fact, and that would lift your final pot to £7,659.
You’d still have been down 23%, but that’s much better than that 54% capital loss alone.
What if you’d done what most people would think wise and reinvested your dividends each year instead of spending the cash? Well, with the share price having slumped so much you’d have bought most of your new shares at prices higher than today. The recent mini-recovery would have helped offset the damage, but you’d have lost £874 of your dividend cash.
You’d be left with £6,785 for an overall loss of 32% — nasty, but if you never suffer a worse single-share catastrophe in your investing career, you really won’t have done too badly.
As part of a diversified portfolio held with a long-term view, you really wouldn’t have been too badly hurt by Barclays — as long as you weren’t holding Lloyds and Royal Bank of Scotland, too!
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.