The Australian Foundation Investment Co Ltd (ASX: AFI) share price has continued to ascend over the past decade.
It is widely regarded that such blue-chip companies safely deliver reasonable returns over the long term.
So, let's take a look and see how much an investor would have made if they had invested $10,000 in this listed investment company (LIC) a decade ago.
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How much would your initial investment be worth now?
If you spent $10,000 on AFIC shares exactly 10 years ago, you would have picked them up for $4.21 each. The purchase would deliver approximately 2,375 shares without topping up during any down periods.
At the closing bell today, the AFIC share price is $8.30, flat for the day. This means that those 2,375 shares would be worth $19,712 – almost double your initial investment.
In percentage terms, this implies a return of about 97% or an average return of 7% per year.
In contrast, the S&P/ASX 200 Index has given back a yearly average of 5.65% over a 10-year time frame.
Have AFIC's dividends paid off in the long run?
AFIC has made a total of 21 bi-annual dividend payments from 2012 to 2022.
It's worth noting that, even with COVID-19 in the background, the company has managed to maintain its dividend distribution amounts.
Adding those 21 dividend payments gives us an amount of $2.50 per share. Calculating the number of shares owned and the total dividend payment gives us a figure of $5,937.50.
When putting both the initial investment gains and dividend distribution, an investor would have a total of $25,649.50.
This means the investor would have been better off having invested in AFIC shares 10 years ago than the benchmark index.
The ASX 200 would have generated a return of $17,391.95 from the same $10,000 investment.
In addition, AFIC dividends include the franking credits that offset any future tax to be paid. So, in hindsight, shareholders would have made the right choice in keeping their AFIC shares for the long term.
AFIC share price summary
Glancing at a shorter time frame, the AFIC share price has travelled upwards in the past 12 months, gaining about 12%. However, when looking at 2022, the company's shares are in the red by 2%.
AFIC commands a market capitalisation of roughly $10.18 billion, with almost 1.23 billion shares on hand.
