By choosing to become a shareholder, you’re placing your trust in a company and supporting it in the development of its business. You’re investing your money in the economy and you expect to receive financial remuneration for this investment, so it’s important for you to be able to measure your investment’s overall performance—the amount your shares have earned for you since your initial investment.
But how do you get started?
“Share price performance is not the only factor to take into account when assessing the profitability of an equity investment over the long term. In addition to this stock market performance, you must also factor in all the parameters that boost your portfolio over time: these include dividends, but also, for Air Liquide shares, regular free share attributions and the loyalty bonus”
In addition to share price performance, three other factors help boost your portfolio’s return:
Once you have identified these four parameters, it’s time to do some math! The “Total Shareholder Return” (TSR) is “the most efficient method to establish the overall profitability of your equity investment over time” according to Patrick Renard, Head of Air Liquide’s Shareholder Services.
Expressed as an average percentage per year, Total Shareholder Return can be compared with the interest rate that would have remunerated your capital if you had placed it in an interest-bearing bank account instead of in a securities account. TSR allows you to directly compare the return on your equity investment to the return on your investments in more classic savings products (such as the French Livret A).
The TSR presented below was calculated based on a registered shareholder eligible for the loyalty bonus, who has benefited from free share attributions and who reinvested dividends received in shares every year.
As a guide, Air Liquide has calculated the TSRs for a €100 investment in Air Liquide shares over the last 5, 10 and 20 years (at December 31, 2018).
Historically, these Air Liquide TSRs all fall within a range of 7 to 13% per year. Please note, however, that these calculations do not include taxation, as tax conditions vary depending on your personal situation, or financial fees, as conditions vary according to the form of shareholding chosen and the bank holding your shares1.
The following example shows a curve highlighting the time required for your portfolio to double in value depending on the TSR.
For example, it would take 93 years to double the value of your portfolio at a rate of 0.75% (the current French Livret A savings product rate) and 139 years at a rate of 0.5% (the current French Compte Épargne Logement mortgage savings account rate). Two easy-to- remember points: it would take around 10 years at a rate of 7% and 7 years at a rate of 10%.
1 At Air Liquide, direct registered shareholders do not pay handling or management fees and receive a reduced brokerage rate.
There are several ways you can improve the total shareholder return of your
Air Liquide share portfolio over time.
Calculate your own TSR
What a calculation, right? That being said, since this is all performance-related, don’t forget that past performance is not necessarily an indicator of the future performance of your shares. The TSR provides you with a snapshot of your portfolio’s return at a given moment, but this should not be considered as a promise of a similar return over the next 30 years.
1 If you hold direct registered shares. If not, contact your financial institution to obtain this information.
Article published on September 16, 2019