“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Newell Brands Inc (NASD: NWL)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.
| Start date: | 03/18/1999 |
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| End date: | 03/15/2019 | ||||
| Start price/share: | $48.44 | ||||
| End price/share: | $15.56 | ||||
| Starting shares: | 206.45 | ||||
| Ending shares: | 360.69 | ||||
| Dividends reinvested/share: | $14.15 | ||||
| Total return: | -43.88% | ||||
| Average annual return: | -2.85% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $5,608.18 | ||||
As shown above, the twenty year investment result worked out poorly, with an annualized rate of return of -2.85%. This would have turned a $10K investment made 20 years ago into $5,608.18 today (as of 03/15/2019). On a total return basis, that’s a result of -43.88% (something to think about: how might NWL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Newell Brands Inc paid investors a total of $14.15/share in dividends over the 20 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).
Based upon the most recent annualized dividend rate of .92/share, we calculate that NWL has a current yield of approximately 5.91%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .92 against the original $48.44/share purchase price. This works out to a yield on cost of 12.20%.
Another great investment quote to think about:
“If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.” — Peter Lynch
