Down but not out

The powers that be at Manulife extol share price performance by noting that any investor who owned shares since the company went public in 1999 (and has reinvested dividends) has enjoyed a compound annual return of 12 per cent.

I’ve cited those numbers myself when I promote my book in media interviews and speeches. After all, they are very impressive. Bernie Madoff had to commit fraud to produce similar results, I always add, tongue firmly in cheek.

But how many investors have actually held shares for ten years while reinvesting all dividends?

I imagine many individual investors are like me and hold Manulife shares in an RSP. The company didn’t pay dividends until 2000 and didn’t offer a dividend reinvestment plan (DRIP) until 2006, so for a long time individual shareholders could not make arrangements for their holdings to grow automatically. So how has the average investor done who followed a buy-and-hold strategy but did not reinvest dividends? Thanks to a handy calculator provided on the Manulife website, the answer is readily available.

The results? Surprisingly poor.

If you bought shares in MFC on the Toronto Stock Exchange in mid-October 1999 and still own them you’ve done just fine, even without reinvesting dividends. Your original investment is up 146 per cent. If you bought in mid-October 2000, 2001, 2002 or 2003, you’re up a lot less, between 10 per cent and 23 per cent, depending on the year of purchase. But at least you’re ahead of the game.

Anyone who bought in mid-October 2004, 2005, 2006, 2007 or 2008 is down between 18 per cent and 48 per cent, depending on your timing.

Montreal money manager Stephen Jarislowsky, one of the largest shareholders in Manulife, has predicted that share price will double in the next two years. We suffering shareholders can only hope he’s right.