“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 Carnival Corp (NYSE: CCL)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.
| Start date: | 07/23/1999 |
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| End date: | 07/22/2019 | ||||
| Start price/share: | $46.44 | ||||
| End price/share: | $45.10 | ||||
| Starting shares: | 215.34 | ||||
| Ending shares: | 341.48 | ||||
| Dividends reinvested/share: | $19.12 | ||||
| Total return: | 54.01% | ||||
| Average annual return: | 2.18% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,396.45 | ||||
As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 2.18%. This would have turned a $10K investment made 20 years ago into $15,396.45 today (as of 07/22/2019). On a total return basis, that’s a result of 54.01% (something to think about: how might CCL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Carnival Corp paid investors a total of $19.12/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 2/share, we calculate that CCL has a current yield of approximately 4.43%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2 against the original $46.44/share purchase price. This works out to a yield on cost of 9.54%.
More investment wisdom to ponder:
“I’d like to live as a poor man with lots of money.” — Pablo Picasso
