“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 Intuit Inc (NASD: INTU)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.
| Start date: | 06/01/1999 |
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| End date: | 05/29/2019 | ||||
| Start price/share: | $13.16 | ||||
| End price/share: | $249.62 | ||||
| Starting shares: | 759.88 | ||||
| Ending shares: | 824.78 | ||||
| Dividends reinvested/share: | $8.57 | ||||
| Total return: | 1,958.82% | ||||
| Average annual return: | 16.32% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $205,801.07 | ||||
The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 16.32%. This would have turned a $10K investment made 20 years ago into $205,801.07 today (as of 05/29/2019). On a total return basis, that’s a result of 1,958.82% (something to think about: how might INTU shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Intuit Inc paid investors a total of $8.57/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 1.88/share, we calculate that INTU has a current yield of approximately 0.75%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.88 against the original $13.16/share purchase price. This works out to a yield on cost of 5.70%.
One more piece of investment wisdom to leave you with:
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” — Warren Buffett
