“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 Sealed Air Corp (NYSE: SEE)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.
| Start date: | 06/28/1999 |
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| End date: | 06/26/2019 | ||||
| Start price/share: | $31.53 | ||||
| End price/share: | $41.62 | ||||
| Starting shares: | 317.16 | ||||
| Ending shares: | 407.80 | ||||
| Dividends reinvested/share: | $6.97 | ||||
| Total return: | 69.73% | ||||
| Average annual return: | 2.68% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,975.07 | ||||
As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 2.68%. This would have turned a $10K investment made 20 years ago into $16,975.07 today (as of 06/26/2019). On a total return basis, that’s a result of 69.73% (something to think about: how might SEE shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Sealed Air Corp paid investors a total of $6.97/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 .64/share, we calculate that SEE has a current yield of approximately 1.54%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .64 against the original $31.53/share purchase price. This works out to a yield on cost of 4.88%.
Another great investment quote to think about:
“You make most of your money in a bear market, you just don’t realize it at the time.” — Shelby Davis
