“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 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 Campbell Soup Co (NYSE: CPB)? Today, we examine the outcome of a two-decade investment into the stock back in 2000.
| Start date: | 01/06/2000 |
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| End date: | 01/03/2020 | ||||
| Start price/share: | $36.31 | ||||
| End price/share: | $48.43 | ||||
| Starting shares: | 275.39 | ||||
| Ending shares: | 479.17 | ||||
| Dividends reinvested/share: | $20.16 | ||||
| Total return: | 132.06% | ||||
| Average annual return: | 4.30% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $23,215.94 | ||||
The above analysis shows the two-decade investment result worked out as follows, with an annualized rate of return of 4.30%. This would have turned a $10K investment made 20 years ago into $23,215.94 today (as of 01/03/2020). On a total return basis, that’s a result of 132.06% (something to think about: how might CPB shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Campbell Soup Co paid investors a total of $20.16/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 1.4/share, we calculate that CPB has a current yield of approximately 2.89%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.4 against the original $36.31/share purchase price. This works out to a yield on cost of 7.96%.
Here’s one more great investment quote before you go:
“The most important thing about an investment philosophy is that you have one.” — David Booth
