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“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 PulteGroup Inc (NYSE: PHM)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.

Start date: 02/12/2001


End date: 02/11/2021
Start price/share: $8.95
End price/share: $49.51
Starting shares: 1,117.32
Ending shares: 1,305.56
Dividends reinvested/share: $3.61
Total return: 546.38%
Average annual return: 9.77%
Starting investment: $10,000.00
Ending investment: $64,582.81

As we can see, the twenty year investment result worked out well, with an annualized rate of return of 9.77%. This would have turned a $10K investment made 20 years ago into $64,582.81 today (as of 02/11/2021). On a total return basis, that’s a result of 546.38% (something to think about: how might PHM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that PulteGroup Inc paid investors a total of $3.61/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 .56/share, we calculate that PHM has a current yield of approximately 1.13%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .56 against the original $8.95/share purchase price. This works out to a yield on cost of 12.63%.

Another great investment quote to think about:
“People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.” — Peter Lynch