“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 Cintas Corporation (NASD: CTAS)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
| Start date: | 05/06/2010 |
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| End date: | 05/05/2020 | ||||
| Start price/share: | $26.10 | ||||
| End price/share: | $210.74 | ||||
| Starting shares: | 383.14 | ||||
| Ending shares: | 443.09 | ||||
| Dividends reinvested/share: | $12.74 | ||||
| Total return: | 833.78% | ||||
| Average annual return: | 25.02% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $93,395.58 | ||||
As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 25.02%. This would have turned a $10K investment made 10 years ago into $93,395.58 today (as of 05/05/2020). On a total return basis, that’s a result of 833.78% (something to think about: how might CTAS shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Cintas Corporation paid investors a total of $12.74/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 2.55/share, we calculate that CTAS has a current yield of approximately 1.21%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.55 against the original $26.10/share purchase price. This works out to a yield on cost of 4.64%.
One more piece of investment wisdom to leave you with:
“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” — Mark Cuban
