“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 two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Campbell Soup Co (NYSE: CPB)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.
| Start date: | 08/12/1999 |
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| End date: | 08/09/2019 | ||||
| Start price/share: | $44.06 | ||||
| End price/share: | $41.79 | ||||
| Starting shares: | 226.95 | ||||
| Ending shares: | 396.62 | ||||
| Dividends reinvested/share: | $20.26 | ||||
| Total return: | 65.75% | ||||
| Average annual return: | 2.56% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,581.37 | ||||
As we can see, the two-decade investment result worked out as follows, with an annualized rate of return of 2.56%. This would have turned a $10K investment made 20 years ago into $16,581.37 today (as of 08/09/2019). On a total return basis, that’s a result of 65.75% (something to think about: how might CPB shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Campbell Soup Co paid investors a total of $20.26/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 1.4/share, we calculate that CPB has a current yield of approximately 3.35%. 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 $44.06/share purchase price. This works out to a yield on cost of 7.60%.
Another great investment quote to think about:
“Nearly every time I strayed from the herd, I’ve made a lot of money. Wandering away from the action is the way to find the new action.” — Jim Rogers
