“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Tractor Supply Co. (NASD: TSCO)? Today, we examine the outcome of a decade-long investment into the stock back in 2009.
| Start date: | 06/26/2009 |
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| End date: | 06/25/2019 | ||||
| Start price/share: | $10.27 | ||||
| End price/share: | $106.63 | ||||
| Starting shares: | 973.71 | ||||
| Ending shares: | 1,075.52 | ||||
| Dividends reinvested/share: | $6.40 | ||||
| Total return: | 1,046.83% | ||||
| Average annual return: | 27.62% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $114,677.33 | ||||
The above analysis shows the decade-long investment result worked out exceptionally well, with an annualized rate of return of 27.62%. This would have turned a $10K investment made 10 years ago into $114,677.33 today (as of 06/25/2019). On a total return basis, that’s a result of 1,046.83% (something to think about: how might TSCO shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Tractor Supply Co. paid investors a total of $6.40/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 1.4/share, we calculate that TSCO has a current yield of approximately 1.31%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.4 against the original $10.27/share purchase price. This works out to a yield on cost of 12.76%.
One more piece of investment wisdom to leave you with:
“The idea that a bell rings to signal when to get into or out of the stock market is simply not credible. After nearly fifty years in this business, I don’t know anybody who has done it successfully and consistently.” — Jack Bogle
