Initial Investment Vs Current Investment With Rights,Bonus And Dividend

Published by slang July 6th, 2006 in Personal Finance

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Assuming we are a shareholder of a company that has been issuing rights, bonus issue and dividend, do we know how to compute our overall returns versus our initial investment.
Append below is such a scenario to understand our current total returns versus our initial investment. In turn, we compare this investment to next alternative investment to see whether we have invested wisely.

Scenario:
Assuming that a shareholder had acquired 1,000 shares at par at the inception of the Company in 1971 and subscribed for the rights issue and received all bonus issues, his/her returns and market value of such investment as at 31 December 2005 would be :-

Year	Particulars	New Shares issued	Cumulative number of shares	Our Cost of Investment
1971	Initial subscription		1,000	$1,000
1973	Rights Issue:1 for 2	500	1,500	$500
1978	Bonus issue:1 for 2	750	2.250
1981	Bonus issue:1 for 2	1,125	3,375
1988	Bonus issue:1 for 3	1,125	4,500
1990	Bonus issue:1 for 2	2,250	6,750
1992	Bonus issue:1 for 3	2,250	9,000
1994	Bonus issue:1 for 4	2,250	11,250
1997	Bonus issue:1 for 2	5,625	16,875

	Current Investment	Initial Investment
Total number of shares a shareholder held	16,875	1,500
Closing market price as at 31/12/2005	$5.35

Market Value of shares held	$180,563	$1,500

Cumulative gross dividend received (1971-2005)	$154,425

# Assumption of issue of exact lots for illustrative purposes only
In view of the foregoing, we can conclude that :
A $1,000 investment made in 1971, and a further $500 investment in 1973, would have generated a total capital value of $180,563 and a total gross dividend of $154,425 as at 31 December 2005.

Had we placed the equivalent investment of RM1,000 and $500 in 1971 and 1973 respectively in a fixed deposit at an annual interest rate of 5%, compounded annually, the amount in the bank would be $7,755 as at end of 2005

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