“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Dollar General Corp (NYSE: DG)? Today, we examine the outcome of a five year investment into the stock back in 2015.
| Start date: | 11/24/2015 |
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| End date: | 11/23/2020 | ||||
| Start price/share: | $65.60 | ||||
| End price/share: | $211.04 | ||||
| Starting shares: | 152.44 | ||||
| Ending shares: | 161.06 | ||||
| Dividends reinvested/share: | $5.78 | ||||
| Total return: | 239.91% | ||||
| Average annual return: | 27.71% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $33,995.04 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 27.71%. This would have turned a $10K investment made 5 years ago into $33,995.04 today (as of 11/23/2020). On a total return basis, that’s a result of 239.91% (something to think about: how might DG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Beyond share price change, another component of DG’s total return these past 5 years has been the payment by Dollar General Corp of $5.78/share in dividends to shareholders. Automatic reinvestment of dividends can be a wonderful way to compound returns, and for the above calculations we presume that dividends are reinvested into additional shares of stock. (For the purpose of these calcuations, the closing price on ex-date is used).
Based upon the most recent annualized dividend rate of 1.44/share, we calculate that DG has a current yield of approximately 0.68%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.44 against the original $65.60/share purchase price. This works out to a yield on cost of 1.04%.
Another great investment quote to think about:
“I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.” — Peter Lynch
