“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 twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into General Mills Inc (NYSE: GIS)? Today, we examine the outcome of a twenty year investment into the stock back in 2000.
| Start date: | 11/03/2000 |
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| End date: | 11/02/2020 | ||||
| Start price/share: | $20.16 | ||||
| End price/share: | $59.73 | ||||
| Starting shares: | 496.03 | ||||
| Ending shares: | 898.28 | ||||
| Dividends reinvested/share: | $23.84 | ||||
| Total return: | 436.54% | ||||
| Average annual return: | 8.76% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $53,676.43 | ||||
As we can see, the twenty year investment result worked out well, with an annualized rate of return of 8.76%. This would have turned a $10K investment made 20 years ago into $53,676.43 today (as of 11/02/2020). On a total return basis, that’s a result of 436.54% (something to think about: how might GIS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that General Mills Inc paid investors a total of $23.84/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 2.04/share, we calculate that GIS has a current yield of approximately 3.42%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.04 against the original $20.16/share purchase price. This works out to a yield on cost of 16.96%.
Another great investment quote to think about:
“I’d like to live as a poor man with lots of money.” — Pablo Picasso
