“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Hershey Company (NYSE: HSY)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
| Start date: | 03/03/2010 |
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| End date: | 03/02/2020 | ||||
| Start price/share: | $40.76 | ||||
| End price/share: | $152.36 | ||||
| Starting shares: | 245.34 | ||||
| Ending shares: | 310.69 | ||||
| Dividends reinvested/share: | $21.46 | ||||
| Total return: | 373.36% | ||||
| Average annual return: | 16.81% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $47,333.65 | ||||
The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 16.81%. This would have turned a $10K investment made 10 years ago into $47,333.65 today (as of 03/02/2020). On a total return basis, that’s a result of 373.36% (something to think about: how might HSY shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Hershey Company paid investors a total of $21.46/share in dividends over the 10 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 3.092/share, we calculate that HSY has a current yield of approximately 2.03%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.092 against the original $40.76/share purchase price. This works out to a yield on cost of 4.98%.
One more investment quote to leave you with:
“History provides a crucial insight regarding market crises: they are inevitable, painful and ultimately surmountable.” — Shelby Davis
