Investing in Air Liquide shares: understanding and calculating profitability

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.

4 key factors to measure the return on your shares

In addition to share price performance, three other factors help boost your portfolio’s return: 

• dividends: This remuneration is paid to you each year by the company in which you have invested. Each year, Air Liquide pays its shareholders a dividend approved during the Shareholders’ Meeting, the total amount of which historically accounts for around 50% of the company’s net profit. This dividend contributes even more to your return on investment if you reinvest it in shares each year.
• free share attributions: Air Liquide regularly grants free shares to all its shareholders. Although this offer does not have an immediate effect on the value of your portfolio, it increases your dividend rights the following year.

As a general rule, one free share is allocated for every 10 shares owned. For a constant dividend, this would correspond to a shareholder receiving an additional 10% in dividends the year following this offer. Air Liquide has a policy of never decreasing the unit value of its dividend.

On October 9 this year, Air Liquide will carry out its 30th free share attribution since the company’s creation.

• The loyalty bonus: This is a 10% bonus on the amount of dividends received and the number of free shares allocated.

How do you calculate your shares’ earnings since your initial investment?

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%.