“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 Masco Corp. (NYSE: MAS)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.
| Start date: | 07/19/1999 |
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| End date: | 07/16/2019 | ||||
| Start price/share: | $27.08 | ||||
| End price/share: | $39.40 | ||||
| Starting shares: | 369.28 | ||||
| Ending shares: | 591.74 | ||||
| Dividends reinvested/share: | $9.30 | ||||
| Total return: | 133.15% | ||||
| Average annual return: | 4.32% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $23,305.17 | ||||
The above analysis shows the twenty year investment result worked out as follows, with an annualized rate of return of 4.32%. This would have turned a $10K investment made 20 years ago into $23,305.17 today (as of 07/16/2019). On a total return basis, that’s a result of 133.15% (something to think about: how might MAS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Masco Corp. paid investors a total of $9.30/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 .48/share, we calculate that MAS has a current yield of approximately 1.22%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .48 against the original $27.08/share purchase price. This works out to a yield on cost of 4.51%.
Here’s one more great investment quote before you go:
“The best stock to buy is the one you already own.” — Peter Lynch
