“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 Eastman Chemical Co (NYSE: EMN)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.
| Start date: | 12/16/1999 |
|
|||
| End date: | 12/13/2019 | ||||
| Start price/share: | $22.69 | ||||
| End price/share: | $78.57 | ||||
| Starting shares: | 440.72 | ||||
| Ending shares: | 824.38 | ||||
| Dividends reinvested/share: | $24.93 | ||||
| Total return: | 547.72% | ||||
| Average annual return: | 9.79% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $64,785.52 | ||||
As we can see, the two-decade investment result worked out well, with an annualized rate of return of 9.79%. This would have turned a $10K investment made 20 years ago into $64,785.52 today (as of 12/13/2019). On a total return basis, that’s a result of 547.72% (something to think about: how might EMN 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, Eastman Chemical Co has paid $24.93/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 2.64/share, we calculate that EMN has a current yield of approximately 3.36%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.64 against the original $22.69/share purchase price. This works out to a yield on cost of 14.81%.
Another great investment quote to think about:
“I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.” — Peter Lynch
