“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 Kohl’s Corp. (NYSE: KSS)? Today, we examine the outcome of a two-decade investment into the stock back in 2000.
| Start date: | 06/02/2000 |
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| End date: | 06/01/2020 | ||||
| Start price/share: | $59.25 | ||||
| End price/share: | $20.70 | ||||
| Starting shares: | 168.78 | ||||
| Ending shares: | 241.10 | ||||
| Dividends reinvested/share: | $17.06 | ||||
| Total return: | -50.09% | ||||
| Average annual return: | -3.41% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $4,994.34 | ||||
As we can see, the two-decade investment result worked out poorly, with an annualized rate of return of -3.41%. This would have turned a $10K investment made 20 years ago into $4,994.34 today (as of 06/01/2020). On a total return basis, that’s a result of -50.09% (something to think about: how might KSS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Kohl’s Corp. paid investors a total of $17.06/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 2.816/share, we calculate that KSS has a current yield of approximately 13.60%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.816 against the original $59.25/share purchase price. This works out to a yield on cost of 22.95%.
Another great investment quote to think about:
“Only when the tide goes out do you discover who’s been swimming naked.” — Warren Buffett
