“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 Johnson Controls International plc (NYSE: JCI)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.
| Start date: | 12/20/1999 |
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| End date: | 12/19/2019 | ||||
| Start price/share: | $4.97 | ||||
| End price/share: | $40.76 | ||||
| Starting shares: | 2,012.07 | ||||
| Ending shares: | 4,251.36 | ||||
| Dividends reinvested/share: | $22.67 | ||||
| Total return: | 1,632.85% | ||||
| Average annual return: | 15.32% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $173,289.03 | ||||
As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 15.32%. This would have turned a $10K investment made 20 years ago into $173,289.03 today (as of 12/19/2019). On a total return basis, that’s a result of 1,632.85% (something to think about: how might JCI shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Many investors out there refuse to own any stock that lacks a dividend; in the case of Johnson Controls International plc, investors have received $22.67/share in dividends these past 20 years examined in the exercise above. This means total return was driven not just by share price, but also by the dividends received (and what the investor did with those dividends). For this exercise, what we’ve done with the dividends is to assume they are reinvestted — i.e. used to purchase additional shares (the calculations use closing price on ex-date).
Based upon the most recent annualized dividend rate of 1.04/share, we calculate that JCI has a current yield of approximately 2.55%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.04 against the original $4.97/share purchase price. This works out to a yield on cost of 51.31%.
Here’s one more great investment quote before you go:
“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
