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Short Term Holding
Slightly Off Topic
Misc.

Share Trading - Some Real Life Numbers

If you had invested £5k in Barclays in 2002 and then reinvested dividends into new Barclays shares then the value of your investment is shown below.

I picked Barclays because they are a classic long term hold share and there is nothing particularly nasty about their history.

I have picked the start of 2002 as the starting date as the share price was not abnormally high or low and assumed an investment of £5K.

Since then you would have received £2,864 of dividends giving you a total investment of £7,862 and if it became necessary to sell today (Feb 2018) at 160p then you would receive £2,607 a loss of over £5,255.

It is unfair to just pick one date, so picking the best value over the last 6 years gives a 337p share price and a value of £5,200, still almost a 33% loss but at least the losses are only the dividends.

To get back to a break even point we need a share price of 501p, this is not unachievable, it was there during the peak of over inflated bank prices, but at the moment this would be a P/E ratio of something like 40:1

I do believe that the current share price is slightly low and looking through the numbers you can find start and end points (especially if you go forward in time) with smaller losses or some profits.

Given that most people start serious investing in their late 30s, 40 or early 50s this would be worrying to anyone who has gone for long term holdings and dividend reinvestment.

For the big funds this is less of a problem as they are able to ignore the bad years, but as a personal investor if you had to sell at any time over the last 6 years it would have been a disaster.

It is easy to deny that I have shown anything as you can always say that the starting point is biased to prove my point and that I have picked a share for the same reason.

But if you are going to say that about Barclays over 16 years.....?

What we seem to see is that the assumed safety net of the new shares bought with dividends protecting against share price fluctuation has not been realised, instead reinvesting the dividends into more shares has increased the losses as those shares were bought at very high prices.

You could of course have taken the dividends as cash and if had done this then you would be in a slight profit.

The Numbers For Barclays

Dividend Graph

There is a table breaking this chart down further but these details can't be reasonably displayed on a screen of this size.
                                 Share             Dividend              Number Of
Pot     Pot              Qty of  Price   Dividend  Amount Per  Dividend  New Shares
Cost    Value    Profit  Shares  Pence   Date      Share(p)    Amount(p) Bought
£4,998  £4,998             899    556            
£4,998  £3,811  -£1,187    899    424    Aug-02      6.35        5708      13
£5,055  £3,184  -£1,871    912    349    Feb-03     12          10949      31
£5,165  £4,322    -£842    944    458    Aug-03      7.05        6653      15
£5,231  £4,629    -£603    958    483    Feb-04     13.45       12889      27
£5,360  £5,112    -£248    985    519    Aug-04      8.25        8126      16
£5,441  £6,064     £623   1001    606    Feb-05     15.75       15760      26
£5,599  £6,037     £438   1027    588    Aug-05      9.2         9445      16
£5,693  £6,402     £709   1043    614    Mar-06     17.4        18143      30
£5,875  £6,809     £934   1072    635    Aug-06     10.5        11259      18
£5,987  £8,611   £2,623   1090    790    Mar-07     20.5        22344      28
£6,211  £6,833     £622   1118    611    Aug-07     11.5        12860      21
£6,339  £5,571    -£768   1139    489    Mar-08     22.5        25634      52
£6,596  £4,362  -£2,234   1192    366    Aug-08     11.5        13705      37
£6,733  £3,933  -£2,799   1229    320    Nov-09      1           1229       4
£6,745  £3,317  -£3,428   1233    269    Feb-10      1.5         1850       7
£6,764  £4,191  -£2,573   1240    338    May-10      1           1240       4
£6,776  £3,668  -£3,107   1244    295    Aug-10      1           1244       4
£6,788  £3,419  -£3,369   1248    274    Nov-10      1           1248       5
£6,801  £3,895  -£2,906   1252    311    Feb-11      2.5         3131      10
£6,832  £3,800  -£3,032   1262    301    May-11      1           1262       4
£6,845  £2,824  -£4,020   1267    223    Aug-11      1           1267       6
£6,857  £2,112  -£4,745   1272    166    Nov-11      1           1272       8
£6,870  £3,277  -£3,594   1280    256    Feb-12      3           3840      15
£6,909  £2,771  -£4,137   1295    214    May-12      1           1295       6
£6,922  £2,134  -£4,788   1301    164    Aug-12      1           1301       8
£6,935  £3,010  -£3,924   1309    230    Nov-12      1           1309       6
£6,948  £3,944  -£3,004   1315    300    Feb-13      3.5         4601      15
£6,994  £4,176  -£2,818   1330    314    May-13      1           1330       4
£7,007  £4,269  -£2,738   1334    320    Aug-13      1           1334       4
£7,020  £3,707  -£3,313   1338    277    Nov-13      1           1338       5
£7,034  £3,640  -£3,394   1343    271    Feb-14      3.5         4701      17
£7,081  £3,374  -£3,707   1361    248    May-14      1           1361       5
£7,094  £2,964  -£4,130   1366    217    Aug-14      1           1366       6
£7,108  £3,294  -£3,814   1372    240    Nov-14      1           1372       6
£7,122  £3,597  -£3,525   1378    261    Mar-15      3.5         4823      18
£7,170  £3,589  -£3,581   1397    257    May-15      1           1397       5
£7,184  £3,505  -£3,679   1402    250    Aug-15      1           1402       6
£7,198  £3,617  -£3,580   1408    257    Nov-15      1           1408       5
£7,212  £2,388  -£4,824   1413    169    Mar-16      3.5         4946      29
£7,261  £2,351  -£4,910   1442    163    Aug-16      1           1442       9
£7,276  £2,728  -£4,548   1451    188    Mar-17      2           2902      15
£7,305  £2,757  -£4,548   1467    188    Aug-17      1           1467       8
£7,320  £3,022  -£4,297   1474    205    Mar-18      2           2949      14
£7,349  £2,561  -£4,788   1489    172    Aug-18      2.5         3722      22
£7,386  £2,447  -£4,939   1510    162    Mar-19      4           6042      37
£7,447  £2,368  -£5,079   1548    153    Aug-19      3           4643      30
£7,493  £2,257  -£5,236   1578    143    Mar-20      0              0       0 COVID-19

Barclays Without Dividend Reinvestment

The chart below shows what would have happened if the dividends were not reinvested as with hindsight this would seem like a good idea.

Hindsight is good, but if investing your dividend elsewhere is a good idea then surely selling the capital and investing that elsewhere would also be a good idea?

In this case we still see a big capital loss from the initial £5k but we also see smaller rises and falls after around 2010 as we are not seeing losses and gains associated with shares bought with the dividend income at the peak of the share price.

Dividend Graph No ReInvest