“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 Citigroup Inc (NYSE: C)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.
| Start date: | 10/28/1999 |
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| End date: | 10/25/2019 | ||||
| Start price/share: | $405.90 | ||||
| End price/share: | $73.17 | ||||
| Starting shares: | 24.64 | ||||
| Ending shares: | 37.63 | ||||
| Dividends reinvested/share: | $145.13 | ||||
| Total return: | -72.47% | ||||
| Average annual return: | -6.24% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $2,755.49 | ||||
The above analysis shows the two-decade investment result worked out poorly, with an annualized rate of return of -6.24%. This would have turned a $10K investment made 20 years ago into $2,755.49 today (as of 10/25/2019). On a total return basis, that’s a result of -72.47% (something to think about: how might C shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Always an important consideration with a dividend-paying company is: should we reinvest our dividends?Over the past 20 years, Citigroup Inc has paid $145.13/share in dividends. For the above analysis, we assume that the investor reinvests dividends into new shares of stock (for the above calculations, the reinvestment is performed using closing price on ex-div date for that dividend).
Based upon the most recent annualized dividend rate of 2.04/share, we calculate that C has a current yield of approximately 2.79%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.04 against the original $405.90/share purchase price. This works out to a yield on cost of 0.69%.
One more investment quote to leave you with:
“All intelligent investing is value investing: acquiring more that you are paying for. You must value the business in order to value the stock.” — Charlie Munger
