“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The investment philosophy practiced by Warren Buffett calls for investors to take a long-term horizon when making an investment, such as a two-decade holding period (or even longer), and reconsider making the investment in the first place if unable to envision holding the stock for at least five years. Today, we look at how such a long-term strategy would have done for investors in Tyson Foods Inc (NYSE: TSN) back in 2000, holding through to today.
| Start date: | 05/01/2000 |
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| End date: | 04/28/2020 | ||||
| Start price/share: | $10.44 | ||||
| End price/share: | $62.80 | ||||
| Starting shares: | 958.08 | ||||
| Ending shares: | 1,227.48 | ||||
| Dividends reinvested/share: | $8.04 | ||||
| Total return: | 670.86% | ||||
| Average annual return: | 10.75% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $77,111.24 | ||||
As we can see, the two-decade investment result worked out quite well, with an annualized rate of return of 10.75%. This would have turned a $10K investment made 20 years ago into $77,111.24 today (as of 04/28/2020). On a total return basis, that’s a result of 670.86% (something to think about: how might TSN 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, Tyson Foods Inc has paid $8.04/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 1.68/share, we calculate that TSN has a current yield of approximately 2.68%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.68 against the original $10.44/share purchase price. This works out to a yield on cost of 25.67%.
Another great investment quote to think about:
“In trading you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep money.” — Ray Dalio
