“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 Stanley Black & Decker Inc (NYSE: SWK)? Today, we examine the outcome of a twenty year investment into the stock back in 2000.
| Start date: | 12/21/2000 |
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| End date: | 12/18/2020 | ||||
| Start price/share: | $29.88 | ||||
| End price/share: | $181.52 | ||||
| Starting shares: | 334.73 | ||||
| Ending shares: | 542.31 | ||||
| Dividends reinvested/share: | $33.82 | ||||
| Total return: | 884.41% | ||||
| Average annual return: | 12.11% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $98,437.16 | ||||
As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 12.11%. This would have turned a $10K investment made 20 years ago into $98,437.16 today (as of 12/18/2020). On a total return basis, that’s a result of 884.41% (something to think about: how might SWK shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Stanley Black & Decker Inc paid investors a total of $33.82/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 2.8/share, we calculate that SWK has a current yield of approximately 1.54%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.8 against the original $29.88/share purchase price. This works out to a yield on cost of 5.15%.
More investment wisdom to ponder:
“Every once in a while, the market does something so stupid it takes your breath away.” — Jim Cramer
