Glencore (LSE: GLEN) shares are a popular investment. It seems investors like the big dividends on offer and the long-term growth story associated with copper. Yet while the shares have their attractions, they are higher up on the risk scale. If I’d invested £5k in the commodity giant one year ago, here’s how much I’d have now.
Share price fall
On 27 January 2023, Glencore shares closed the day at 540.3p. So let’s assume I picked up £5k worth of stock at that price. That would have got me 925 shares (ignoring trading commissions).
Fast forward to today and Glencore shares are trading at 422.7p, roughly 22% below the level they were at a year earlier. If I had 925 shares, they’d be worth roughly £3,910. So my investment would be down by a little over a grand.
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Dividend income
Of course, we also need to factor in the dividends here. They will have made a significant contribution to returns as the yield’s quite decent.
Looking at Glencore’s dividend history, I can see that I would have been entitled to three dividends by now if I’d bought the stock a year ago. I’ve listed them below:
- 1 June 2023 – $0.22 per share (interim payout)
- 22 September 2023 – $0.22 per share (final payout)
- 22 September – $0.08 per share (special dividend)
Converting these into pounds, I calculate they’d be worth a total of around 43p.
Multiply that by 925 shares and I’d have just under £400 in dividend income. So overall I’d have about £4,310 now – roughly 14% less than the amount I started with.
Poor returns
Obviously a return of -14% over a year is disappointing. However, it’s especially poor comparing it to the performance of some other FTSE 100 stocks over the same period.
Take software company Sage, for example. Over the last year, it’s risen about 55%. Or defence powerhouse BAE Systems. Over the last 12 months, its share price has climbed about 36%. Both stocks have also paid dividends.
Looking at well-known US-listed stocks, the performance differentials are even larger. Over the last year, Microsoft shares have risen 63% (in USD terms) while Nvidia shares have climbed about 200% as the world has become more digital.
What went wrong?
So what went wrong with Glencore shares? Well, there were a few factors that dragged the share price down, including weaker commodity prices, lower demand for commodities from China, and a big drop in earnings (earnings per share for 2023 are expected to be down 60% year on year).
These factors illustrate the risks of investing in mining companies. Ultimately, there’s a lot that can go wrong (and it’s often completely out of the companies’ hands).
So while there is a long-term growth story associated with renewable energy and electrification here, there’s no guarantee that the investment will work out.
Because of this high level of uncertainty, I don’t invest in mining companies. To my mind, they’re too speculative. I prefer to invest in companies that have recurring revenues (like Sage or Microsoft) as they tend to be a bit more predictable.
