£1k put into London Stock Exchange Group shares 5 years ago would be worth this much

London Stock Exchange Group (LSE: LSEG) is known for delivering multi-bagging shareholders long-term returns. But the stock also fell sharply between 2008 and 2009 due to the decade’s financial and credit crunch.

But if I invested £1,000 in the shares of a global financial markets infrastructure provider five years ago, how much would it be today?

Turbulent financial markets

To answer these questions, it is worth noting that these are turbulent times for the financial markets. The pandemic and the war in Ukraine have disrupted the economy and geopolitics. Stock price history in January 2019

But in February 2018, I was able to buy shares at about 3,989p. And that compares to the current price of close to 7,508p. So the gain has been around 3,519p per share from the movement in the stock level over the past five years.

And the business’s financial record has been strong over the period. For example, the compound annual growth rate (CAGR) for multi-year revenue runs around 32%. And earnings have a CAGR of close to 13% with a healthy-looking operating cash flow of 48%.

So with such a strong performance, it is not surprising that the CAGR for shareholder dividends is also strong. And the current figure is running around 17%. Indeed, the increasing flow of shareholder payments will benefit.

And my calculations show that I have collected over 369p per share in dividend payments. So that can be added to the gain made on the share price to give a five-year total return of 3,888p per share, or just over 97%.

Therefore, ignoring buying and selling costs, a £1,000 investment in London Stock Exchange Group shares five years ago would be worth around £1,970 today. And the stock will be a good performer in a well-diversified stock portfolio

Driven by earnings

What is right for the business? The answer to that question can be summed up in one word: income.

As in many stock market success stories, the main driver of progress is how businesses can grow and increase profits. And the London Stock Exchange has done that by doing well and finding new business areas to help it expand and grow.

One example is the announcement of a strategic partnership with last December Microsoft. The directors consider it their goal to build “next generation” service that will “enable” LSE customers. And, of course, the improved service should generate greater profits for the business.

However, as with all companies, positive expectations do not guarantee growth. And all businesses can face setbacks from time to time. Indeed, it is possible that investors will lose money if they buy today. We only have to look at the very period for stocks in the noughties for proof of that.

Meanwhile, the expected dividend yield is running close to 1.5% for 2023. And although this is not a high value, I am very interested in the business with further research now.

My goal is to hold the stock for the long term because of the continued growth story I hope it will deliver.