“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The investment philosophy practiced by Warren Buffett calls for investors to take a long-term horizon when making an investment, such as a twenty year holding period (or even longer), and reconsider making the investment in the first place if unable to envision holding the stock for at least five years. Today, we look at how such a long-term strategy would have done for investors in Constellation Brands Inc (NYSE: STZ) back in 1999, holding through to today.
| Start date: | 04/26/1999 |
|
|||
| End date: | 04/23/2019 | ||||
| Start price/share: | $6.47 | ||||
| End price/share: | $207.48 | ||||
| Starting shares: | 1,545.60 | ||||
| Ending shares: | 1,616.79 | ||||
| Dividends reinvested/share: | $7.88 | ||||
| Total return: | 3,254.52% | ||||
| Average annual return: | 19.20% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $335,693.60 | ||||
As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 19.20%. This would have turned a $10K investment made 20 years ago into $335,693.60 today (as of 04/23/2019). On a total return basis, that’s a result of 3,254.52% (something to think about: how might STZ shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Beyond share price change, another component of STZ’s total return these past 20 years has been the payment by Constellation Brands Inc of $7.88/share in dividends to shareholders. Automatic reinvestment of dividends can be a wonderful way to compound returns, and for the above calculations we presume that dividends are reinvested into additional shares of stock. (For the purpose of these calcuations, the closing price on ex-date is used).
Based upon the most recent annualized dividend rate of 3/share, we calculate that STZ has a current yield of approximately 1.45%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3 against the original $6.47/share purchase price. This works out to a yield on cost of 22.41%.
One more piece of investment wisdom to leave you with:
“If you can follow only one bit of data, follow the earnings.” — Peter Lynch
