“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 Comcast Corp (NASD: CMCSA)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.
| Start date: | 07/26/1999 |
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| End date: | 07/24/2019 | ||||
| Start price/share: | $11.57 | ||||
| End price/share: | $44.87 | ||||
| Starting shares: | 864.30 | ||||
| Ending shares: | 1,058.27 | ||||
| Dividends reinvested/share: | $4.66 | ||||
| Total return: | 374.85% | ||||
| Average annual return: | 8.10% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $47,510.75 | ||||
As we can see, the twenty year investment result worked out well, with an annualized rate of return of 8.10%. This would have turned a $10K investment made 20 years ago into $47,510.75 today (as of 07/24/2019). On a total return basis, that’s a result of 374.85% (something to think about: how might CMCSA shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Comcast Corp paid investors a total of $4.66/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 .84/share, we calculate that CMCSA has a current yield of approximately 1.87%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .84 against the original $11.57/share purchase price. This works out to a yield on cost of 16.16%.
One more piece of investment wisdom to leave you with:
“Value investing means really asking what are the best values, and not assuming that because something looks expensive that it is, or assuming that because a stock is down in price and trades at low multiples that it is a bargain.” — Bill Miller
