In your columns and videos you often quote long-term returns for stocks, assuming all dividends were reinvested. Where do you get these numbers and how can I look up the information for myself?
I get most of my stock return information from Bloomberg – a proprietary service that comes with a hefty price tag (thankfully, my employer pays the bills, not me). Most people don’t have a Bloomberg terminal sitting on their kitchen counter, of course, but there are other options for do-it-yourself investors.
One website I tried recently is longrundata.com. The site is free – at least for now – and easy to use. Just enter a stock symbol, select a start and end date, and the website calculates how much an initial $1,000 (U.S.) investment would be worth at the end of the time period if all dividends had been reinvested.
Examining a stock’s long-term total return is helpful for a couple of reasons. First, it identifies companies that have stood the test of time. Second, it demonstrates the power of dividend growth and compounding, which are two of your biggest allies as an investor.
Some long-term returns are nothing short of spectacular. For example, I entered JNJ – the ticker symbol for Johnson & Johnson – and chose a start date of June 15, 1970 (that’s the farthest back I could go for J&J) and an end date of June 25, 2013. Over that 43-year period, $1,000 would have grown to … ready for it … $213,375.
The website also calculates the stock’s annualized total return – in J&J’s case it was a sizzling 13.3 per cent – which is useful for comparing against an index. The stock’s dividend growth rates over the previous five, 10 and 25 years are also provided, along with recent ex-dividend dates.
What about Canadian stocks? You can get those, too, but only if they’re inter-listed on a U.S. exchange. The drawback for Canadian investors is that everything is done in U.S. dollars.
That all Canadian stocks aren’t yet included is sort of ironic given that the website was started by two brothers from Windsor, Ont. Harvey Malovich and his brother Dennis – both former equities traders – launched longrundata.com a few years ago “as a personal project, and now we’re trying to grow it into something bigger,” Harvey said in an interview.
Despite his years as a trader, “my outlook on [personal] investing is not a trading outlook. I’m a long haul, long-term investor. What we found was it was difficult to find dividend reinvestment information on the Web,” said Harvey, 48, who is now a high school math and business teacher.
His brother Dennis, 44, a software developer, handles the technical side of the website. They’re hoping to add all Canadian-listed stocks to the site within six months or so. They’re also aiming to beef up the site in other ways, with a goal to eventually charge for at least some of the services.
Harvey is a huge believer in buying companies that raise their dividends regularly. One of his favourite examples is Colgate-Palmolive: He points out that $1,000 invested in the toothpaste maker in 1977 would be worth more than $400,000 today.
“It’s mind boggling,” he says.
Calculating a stock’s total return is a backward-looking analysis, and most people probably don’t hold stocks for such long periods. What’s more, not every company thrives – or even survives – as long as J&J and Colgate-Palmolive have. But if you play around on longrundata.com, you’ll see that lots of companies have produced impressive total returns, even when they’re held for a decade or two.