The energy companies have been out of favour this year as politicians have been promising to freeze prices as part of their electioneering, and that’s pushed Centrica (LSE: CNA). But it’s not the short term that matters, it’s the long term. So how have Centrica shares fared over the past ten years?
A troubling decade
Well, it’s been a tough decade, what with the banking crisis and recession and all that. It’s not been one of the best decades for FTSE 100, which has gained just 41% — and thanks to the past year’s poor performance, the Centrica price has lagged the index with a gain of only 35.7% to 304p today.
A sum of £10,000 invested in Centrica shares a decade ago would be worth £13,571 now, and you might be satisfied with that considering the economic turmoil of the period.
But you’d also have had dividends to add to your return, and Centrica has for years been one of the best payers in the market — so what would the cash have done for your pot?
Add in the dividends…
You might be surprised to learn that, while share price appreciation would only have made you a modest profit of £3,571 over ten years, over the same period you would also have accumulated £5,800 in cash from dividends!
The dividends would have outstripped your share price gains, for a total pot of £19,371 and a 93.7% gain.
That’s not bad over ten years, but had you reinvested your dividends in new Centrica shares every year instead of keeping and spending the cash, you’d actually have done a bit better than that.
In fact, you’d have topped a 100% gain and doubled your money to £20,730!
The difference between retaining the cash and reinvesting is only a modest £1,359 in this case, and that’s largely because of the past year’s fall in the Centrica price — which meant you’d have bought a good few new shares at higher prices than today’s. Had the shares not fallen this year and remained at the 370p they were at in September 2013, you would have reached a fraction under £25,000.
The next ten?
But heading into the ten years, your big advantage is that you’d be starting with 6,700 Centrica shares instead of the 4,460 you would have initially bought.
How will the decade go? Well, we can’t really know, but if Centrica doesn’t maintain its winning ways with dividends and bring in another decade at least as good as the last one, I’ll be very surprised.