“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 Unum Group (NYSE: UNM)? 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: | $37.31 | ||||
| End price/share: | $28.32 | ||||
| Starting shares: | 268.01 | ||||
| Ending shares: | 397.78 | ||||
| Dividends reinvested/share: | $10.49 | ||||
| Total return: | 12.65% | ||||
| Average annual return: | 0.60% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,271.30 | ||||
As we can see, the two-decade investment result worked out as follows, with an annualized rate of return of 0.60%. This would have turned a $10K investment made 20 years ago into $11,271.30 today (as of 08/09/2019). On a total return basis, that’s a result of 12.65% (something to think about: how might UNM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Unum Group paid investors a total of $10.49/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 1.14/share, we calculate that UNM has a current yield of approximately 4.03%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.14 against the original $37.31/share purchase price. This works out to a yield on cost of 10.80%.
One more investment quote to leave you with:
“It’s not how much money you make, but how much money you keep.” — Robert Kiyosaki
