“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 Nucor Corp. (NYSE: NUE)? Today, we examine the outcome of a two-decade investment into the stock back in 2000.
| Start date: | 07/17/2000 |
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| End date: | 07/15/2020 | ||||
| Start price/share: | $8.85 | ||||
| End price/share: | $41.68 | ||||
| Starting shares: | 1,129.94 | ||||
| Ending shares: | 1,991.06 | ||||
| Dividends reinvested/share: | $25.01 | ||||
| Total return: | 729.87% | ||||
| Average annual return: | 11.16% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $83,051.68 | ||||
As we can see, the two-decade investment result worked out quite well, with an annualized rate of return of 11.16%. This would have turned a $10K investment made 20 years ago into $83,051.68 today (as of 07/15/2020). On a total return basis, that’s a result of 729.87% (something to think about: how might NUE shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Nucor Corp. paid investors a total of $25.01/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 1.61/share, we calculate that NUE has a current yield of approximately 3.86%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.61 against the original $8.85/share purchase price. This works out to a yield on cost of 43.62%.
Another great investment quote to think about:
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” — Peter Lynch
