Legal & General Share Price (LGEN)

"Tomglan - how do you get to an averaged annualised return of "just under 10% per year" when (i) you state the average yield has been 6.5% pa, and (ii) the share price is only up 17% over the 10 year period, so an average annualised growth rate of 1.6%?"

You can re-create and verify the ~10% return by creating a simple spreadsheet that maps out the number of shares you'd end up with if you re-invested the dividend each year. Here's a rough calculation of where the 10% comes from though: 6.5% average div yield for the period + 8% average div growth = 14.5% (assuming yield stays constant) - 4.5% due to de-rating of shares (i.e. you purchased the shares with a 5% yield, they now sit at 8% which works out as a -4.8% per year headwind) = ~10% return.

This has value at the moment to my mind but how much it’s recognised is the variable at this point

Now consider this;- Farmer's do not continually buy and sell land because that would largely defeat the purpose of investing in land which is to obtain a profit from raising crops or animals. Similarly manufacturers do not continually buy and sell factories which they have invested in verb sap.

Tichtich - see comments below. I love a good debate! It's good to have to justify your position and test your theories. So long as we're both comfortable with our investment strategy that's ok by me.

" . . . the market price doesn't matter . . . " - it doesn't in isolation but total return is my key measure

" . . . The stock price only matters when you sell . . . " - agree. However, if a stock price shows a continuous decline over the long term it would be foolish to ignore

" . . . you don't need real growth to get good returns, as long as you have a good enough dividend . . . " - that's assuming your capital is not decining and eating into your overall total return

" . . . Are you sure it's not you who sees the US stock market through rose tinted spectacles? . . . " - absolutely not. It was you that brought it into the equation, not me! I'm more of a global equity tracker fund merchant which, accepted, includes a 65% exposure to listed US businesses

Good luck with your investing

@zac_04

Please read my original comment again. My hypothetical was that you hold the stock forever, so the market price doesn't matter. I then went on to talk about selling in the long term. Short term stock prices don't matter if you're holding for the long term. The stock price only matters when you sell.

I assure you, I don't see LGEN through rose tinted spectacles. I'm not recommending it to anyone. It would be a great investment if the dividend actually keeps up with inflation forever, or at least for the very long term, but I'm by no means confident that it will do so, or even come close.

My point was really the general one that you don't need real growth to get good returns, as long as you have a good enough dividend.

Are you sure it's not you who sees the US stock market through rose tinted spectacles? 😉