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“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
$10,000

06/15/2009
$152,746

06/13/2019
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