“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 DuPont (NYSE: DD)? 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: | $245.59 | ||||
| End price/share: | $63.95 | ||||
| Starting shares: | 40.72 | ||||
| Ending shares: | 81.71 | ||||
| Dividends reinvested/share: | $56.69 | ||||
| Total return: | -47.75% | ||||
| Average annual return: | -3.19% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $5,226.97 | ||||
The above analysis shows the two-decade investment result worked out poorly, with an annualized rate of return of -3.19%. This would have turned a $10K investment made 20 years ago into $5,226.97 today (as of 12/19/2019). On a total return basis, that’s a result of -47.75% (something to think about: how might DD 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, DuPont has paid $56.69/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 1.2/share, we calculate that DD has a current yield of approximately 1.88%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.2 against the original $245.59/share purchase price. This works out to a yield on cost of 0.77%.
More investment wisdom to ponder:
“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” — Peter Lynch
