“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Constellation Brands Inc (NYSE: STZ)? Today, we examine the outcome of a ten year investment into the stock back in 2009.
| Start date: | 06/15/2009 |
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| End date: | 06/13/2019 | ||||
| Start price/share: | $13.01 | ||||
| End price/share: | $189.34 | ||||
| Starting shares: | 768.64 | ||||
| Ending shares: | 807.03 | ||||
| Dividends reinvested/share: | $8.63 | ||||
| Total return: | 1,428.04% | ||||
| Average annual return: | 31.34% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $152,746.10 | ||||
The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 31.34%. This would have turned a $10K investment made 10 years ago into $152,746.10 today (as of 06/13/2019). On a total return basis, that’s a result of 1,428.04% (something to think about: how might STZ shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Constellation Brands Inc paid investors a total of $8.63/share in dividends over the 10 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 3/share, we calculate that STZ has a current yield of approximately 1.58%. 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 $13.01/share purchase price. This works out to a yield on cost of 12.14%.
Another great investment quote to think about:
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher
