BT Group (LSE: BT.A) is a popular stock among UK investors. Along with other well-known FTSE 100 stocks, such as Lloyds Bank, Royal Dutch Shell, BP, and GlaxoSmithKline, it can be found within a lot of private investor portfolios.
But let’s face it, BT shares haven’t been a good investment in recent years. Here’s a look at how much £1,000 invested in the group five years ago would be worth today.
Nasty downward trend
A half-decade ago, BT shares were changing hands for around 410p. Interestingly, had you purchased £1,000 worth of its shares in December 2014 at 410p (244 shares), you’d have initially enjoyed some decent share price gains. By late November 2015, the FTSE 100 stock was then trading near 500p, meaning you would have been sitting on an unrealised capital gain of around 22%. Not a bad return in less than a year.
However, since early 2016, BT shares have been trapped in a nasty downward trend due to the fact revenue growth has stalled and debt has increased significantly. As a result, any unrealised capital gains you made back in 2015 would now be a distant memory.
Dividends have softened the blow
Today, BT shares trade for just 186p. That’s 54.6% lower than the share price of 410p five years ago. This means that your initial investment of £1,000 would now be worth approximately £454 (not factoring in any trading commissions). Ouch!
Of course, we do need to factor dividends into the calculation here. Given that BT pays a large dividend, payouts over the last five years will have softened the blow to a degree.
Looking at BT’s dividend history, I calculate you’d have picked up 72.6p per share in dividends had you invested in the stock five years ago. Assuming you didn’t reinvest these dividends, these would be worth around £177 (244 shares x 0.726 = £177). Adding these dividends to the value of your shares (£454) generates a total of £631.
So, if you’d invested £1K into BT shares five years ago, your money would now be worth £631 (excluding commissions). That’s a loss of 37%.
Ultimately, this poor performance reinforces the importance of diversification. Even the most well-known FTSE 100 companies can experience large share price declines at times. For this reason, it’s sensible to spread your money over many different stocks, lowering your stock-specific risk.
If you only own a few stocks (as many investors do), a near-40% loss is going to hurt your investment performance. However, if you own a diversified portfolio that holds, say, 20 stocks (meaning you only have around 5% invested in each stock) across a number of different sectors, this kind of loss on one stock won’t be the end of the world.
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Edward Sheldon owns shares in Lloyds Bank, GlaxoSmithKline, and Royal Dutch Shell. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.