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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 solid blue chips over the long term can generate significant wealth for investors. In this article, I’ll look at one of these boring blue chips that has given investors significant returns since its IPO nine years ago – about 262%!
The wealth creator
The company that we are talking about here is one of the biggest insurance group in the world – AIA Group Ltd (SEHK: 1299). There are two parts to AIA Group’s investment returns, which are dividends and share price appreciation. Let’s take a look at them individually.
To start with, AIA Group has consistently paid out dividends after its IPO. From 2011 to 2018, its dividend per share (DPS) grew from 33 Hong Kong cents to 123.50 Hong Kong cents. Cumulatively, investors who held its shares during the decade would have received 541.42 Hong Kong cents in dividends.
Based on AIA Group’s share price of about HK$ 23.00 (as of October 2010), investor would have received a total return of 23.5%.
Next, I’ll look at AIA Group’s share price changes during the period. Based on today’s price of HK$77.80 (as of the time of writing) and the price of HK$ 23.00 back in October 2010, investors who held AIA Group’s shares would have gained about 238% during the period. Comparatively, the Hang Seng Index (INDEXHANGSENG: HIS) gained less than 20% during this period.
Putting both parts together, investors would have turned every dollar of investment in AIA Group into HK$3.62 over the last nine years.
From the above, we can see that investing in blue-chip companies can also deliver good return. 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 Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.