I was reflecting on the commodity boom Australia has experienced over the decades and wanted to express this performance in terms of an increase in value of buying a share in the resource sector. Of course, this is all with the benefit of hindsight, and probably unlikely to re-occur in the future.
What better analysis than to buy 1000 BHP shares in May 1984 for $14.40 each, for an investment of $14,400?
Over the years the dividends have been re-invested to purchase additional shares, share splits have occurred, and Bluescope Steel was hived off and so was Onesteel Ltd. Cash dividends of $180,000 were paid that were re-invested into buying more BHP shares. Franking tax credits of $77,500 were paid. Depending on your tax rate, the dividends could even be free of additional tax because of the franking tax credits.
As of 1st July 2011 this is what 1000 BHP shares worth $14,400 have become over the 27 years:
22,140 BHP shares valued at $969,067
5,517 Bluescope shares valued at $6,841
3,488 Onesteel shares valued at $6,417
Total $982,200 - 68 times the original investment or 16.8% compounded return.
BHP's performance demonstrates what was right with Australia's economy, and possibly what is now wrong as we face a two speed economy punishing the non-material sectors.