Blue-chip stocks are generally perceived as investments that give slow and steady returns to investors. In other words, they are “boring” investments.
Yet, investing in a solid blue chip over the long term can generate significant wealth for investors.
In this article, I’ll look at one of those boring blue chips that gave investors a significant return over the last decade – about 275%!
The wealth creator
The company that we are talking about here is none other than our biggest local bank, DBS Group Holdings Ltd (SGX: D05).
There are two parts to DBS Group’s investment returns, which are dividends and share price appreciation. I’ll take look at them individually.
To start with, DBS Group has consistently paid out dividends over the decade. From 2009 to 2018, the dividend per share (DPS) grew from S$0.56 to S$1.20. Cumulatively, investors who held its shares during the decade would have received S$7.23 in dividends. Based on DBS Group’s share price of about S$9 (as of January 2009), investors would have received a total return of 80.3%.
Next, let’s look at DBS Group’s share price changes during the period. Based on today’s price of S$26.50 (as of writing) and the price of S$9 at the beginning of 2009, investors who held DBS Group’s stock would have gained about 194% during the period. Comparatively, the Straits Times Index (SGX: ^STI) gained about 43% during this period.
Putting both parts together, investors would have turned every dollar of investment in DBS Group into S$3.75 over the last decade. That’s not a bad return, to say the least.
From the above, we can see that investing in blue-chip companies can also deliver great returns. And the take-away? Invest in a high-quality company and hold it over a long period of time!
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended the shares of DBS Group Holdings Ltd.