“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 AmerisourceBergen Corp. (NYSE: ABC)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.
|Average annual return:||15.94%|
The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 15.94%. This would have turned a $10K investment made 20 years ago into $192,916.71 today (as of 10/07/2019). On a total return basis, that’s a result of 1,827.91% (something to think about: how might ABC shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that AmerisourceBergen Corp. paid investors a total of $11.46/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 1.6/share, we calculate that ABC has a current yield of approximately 1.95%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.6 against the original $5.24/share purchase price. This works out to a yield on cost of 37.21%.
Here’s one more great investment quote before you go:
“When you sell in desperation, you always sell cheap.” — Peter Lynch