Method of calculating “Long-term return on purchase cost”

[Gregory D.]

Hello Jerome,

I know that you have already tried to explain the notion of long-term return on purchase cost, present in the files of each value, but I am not sure that I know how to interpret this indicator correctly.

For example, what do you mean when you write for PG "Procter & Gamble's long-term expected return on purchase cost is 35.02%."?

What is meant by Long-Term and how is this ratio calculated?
Do you mean that after x (to be defined?) years of holding this title and at the current purchase price, we can expect an annual return of 35%? Or do these 35% correspond to a cumulative return over x (?) years?

Thank you for these details.
Have a great week,

Gregory

[Jerome]

Hi Gregory
This is an indicator specific to dividendes.ch which aims to measure the quality of a security paying increasing dividends. All this is of course very theoretical, but to put it simply it means that if we do buy&hold, we have a chance of achieving a return on purchase cost of x%. It is indeed an annual return, not cumulative, measured in relation to the price paid for the acquisition of the security.
It is clear that to reach this amount of 35% it takes many years, even decades! But here we are talking about stocks that are capable of paying increasing dividends over such long periods and that is the whole point of this indicator.
Of course, in reality, few investors will actually achieve this hypothetical return because a lot can happen over such a long period, from the time of purchase. And here I am not only thinking of problems related to the company that is being purchased (payers of increasing dividends have defensive and resilient capacities) but also, and perhaps above all, to the investor himself.
So we must take this figure more as an element of comparison than as an absolute figure.

[Gregory D.]

OK, thanks for the explanation.
Good evening,
Gregory

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