If You'd Invested $10,000 in Taiwan Semiconductor Manufacturing Stock 10 Years Ago, Here's How Much You'd Have Today (Spoiler: Wow!)
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Taiwan Semiconductor Manufacturing (NYSE: TSM), or TSMC, is quite a popular stock. To understand why, check out its trailing returns in the table below. (I'll add returns for an S&P 500 index fund, too, for comparison.)
|
| 5-Year Avg. Annual Return | 10-Year Avg. Annual Return | 15-Year Avg. Annual Return |
|---|---|---|---|
| Taiwan Semiconductor Manufacturing | 33.65% | 26.41% | 22.96% |
| SPDR S&P 500 ETF | 16.22% | 13.99% | 13.95% |
Source: Morningstar.com, as of Oct. 21, 2024.
See? Amazing. Even the S&P 500 returns are quite good -- because over many decades, the S&P 500 has averaged annual gains of close to 10%.
Let's put some of those numbers into better perspective. If you'd plowed $10,000 into Taiwan Semiconductor Manufacturing a decade ago, how much would it be worth today?
Well, you might want to sit down first, because the answer is... about $101,000. Better still, if you'd reinvested the dividends it paid, your stake would be worth nearly a hefty $123,000. Those are, respectively, average annual growth rates of 26% and 28.6% -- well above the S&P 500's average returns, which were, respectively, 12.7% and 13.7%.
Taiwan Semiconductor Manufacturing's dividend yield was recently 1.23%. While that might seem low, it's been growing rapidly, averaging annual growth of 14% and nearly doubling over the past five years. Even better, its payout ratio, the percentage of earnings it pays out in dividends, was recently around 36%, suggesting that the dividend is sustainable, with plenty of room to grow more.
Of course, it's more important to wonder how Taiwan Semiconductor Manufacturing will do in the future. Opinions are always divided, but its stock seems reasonably valued at recent levels. Bulls expect artificial intelligence (AI) to drive demand for more chips, but bears worry about the company's location, in Taiwan, as China might cause trouble there.
The company has had a great run in large part because it's one of the few semiconductor companies that actually makes chips. Most others just design them -- and have them built by another company. Thus, its future does seem quite promising.
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