“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 Jack Henry & Associates, Inc. (NASD: JKHY)? 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: | 05/30/2019 | ||||
| Start price/share: | $9.14 | ||||
| End price/share: | $132.22 | ||||
| Starting shares: | 1,094.09 | ||||
| Ending shares: | 1,377.28 | ||||
| Dividends reinvested/share: | $10.51 | ||||
| Total return: | 1,721.04% | ||||
| Average annual return: | 15.61% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $182,148.58 | ||||
As we can see, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 15.61%. This would have turned a $10K investment made 20 years ago into $182,148.58 today (as of 05/30/2019). On a total return basis, that’s a result of 1,721.04% (something to think about: how might JKHY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Jack Henry & Associates, Inc. paid investors a total of $10.51/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 1.6/share, we calculate that JKHY has a current yield of approximately 1.21%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.6 against the original $9.14/share purchase price. This works out to a yield on cost of 13.24%.
Here’s one more great investment quote before you go:
“Markets can remain irrational longer than you can remain solvent.” — John Maynard Keynes
