You know, there’s a constant stream of news available to investors these days, and while this can be seen as a good thing, it can also cause investors to forget about the long-term and sell their investment on a poor quarterly update from the company.
Sadly, it’s also true that investors will be reluctant to buy back into the shares, even as things start to improve. Over the course of time this short-termism can seriously impact your wealth.
Five-year focus
Normally in one of my articles I would present a chart that ran from a one-month to a 12-month view. However, today the chart is the ultimate in anti-short-termism and stretches back for five years. It features, in my opinion, two of the best stocks on the FTSE 100: British American Tobacco (LSE: BATS) and Imperial Brands (LSE: IMB), formally Imperial tobacco.
Now neither one of these stocks can boast the 465% rise that shareholders in, say, Barratt Developments have witnessed. However, I wonder how many investors have actually held that stock continually for the last five years.
Having said that, these stocks would have earned investors a capital return of 59% for British American and 89% for Imperial Brands. As the chart aptly demonstrates, both of these stocks have left the FTSE 100 for dust over the last five years.
A combination of capital and income
Despite being some of the best performers, investors have also had a steady and importantly, a growing stream of dividends.
Over the last five years, British American has grown its dividend from 126.5p to 154p for the year ending 2015. That’s good for a CAGR (compound annual growth rate) of 4%.
Not to be outdone, Imperial Brands has grown the payout from 95.1p in 2011 to 141p currently – this return shows an even more impressive CAGR of over 8%!
So it’s fair to say that these shares have consistently outperformed the benchmark, both in terms of capital return and income. Indeed, on a total return basis, British American has increased by 83% and Imperial Brands by 123% – none too shabby.
Proper Marmite shares
There’s no doubt about it, these shares are certain to divide opinion across the investment community, and I would concede that these two investments wouldn’t appeal to all investors. As with Marmite, some people will love ‘em and some will most certainly not! Then again, you could make an argument against many companies listed on the stock market that would fail the ethical test should investors drill down into the business.
However in my view, in the cold light of day, there’s no escaping the fact that these investments have been two of the best stocks to own over the last five years, and I wouldn’t be surprised to see them outperform over the next five too.