I’ve been looking at the total returns from some of out most popular FTSE 100 stocks over the past decade, and the banks have been some of the most traumatic.
Bailed-out Lloyds Banking Group, for example, would have reduced a £10,000 investment to just £3,500 in the 10 years between September 2004 and September 2014, but that was a resounding success compared to the bank that Fred shredded.
Shares in Royal Bank of Scotland (LSE: RBS) (NYSE: RBS.US), you see, have crashed to effectively almost nothing in the same period.
Before a fall…
Prior to the crash, when Mr Goodwin and his cronies were splashing the cash on acquisitions as if it was going out of fashion, RBS actually had a two-for-one stock split, it’s shares were getting so headily priced. But those acquisitions proved disastrous, and crank forward a few years and the price had crashed so low it was time for a 10-for-one consolidation.
Accounting for both of those, RBS shares have dropped from an effective price of £68.45 apiece at the end of September 2004, to just 368p a decade later! That’s a cringe-making fall of 95%, and £10,000 invested in shares back then would be worth just £538 today!
Now, this is the point at which I like to point out that share-price appreciation alone is not the whole story, and I reveal what a handsome addition you’d have had from 10 years of dividends!
Er, what dividends?
Well, I know, you’re ahead of me. RBS’s dividend before the crash was low, and it was stopped altogether as part of the bail-out deal. In total, you’d have had only an extra £211 in cash to add to your pot.
But as it happens, RBS’s share price performance was so abysmal, that would have actually bumped your pot from that £538 as far as £749. Whoa, party time!
Actually, you’d have done better to spend your dividend cash on a very modest party than do what is usually more sensible, which is to reinvest in more RBS shares each year. I know we’re talking about only £211, but buying more shares before the crash would have lost you most of that.
You’d have lost that too
In fact, you’d have dropped £185 of your dividend returns, and you’d be left with an investment worth just £564.
If you did invest in RBS all that time ago, I do hope it was only a small portion of a well-balanced portfolio.