“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 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 Genuine Parts Co. (NYSE: GPC)? Today, we examine the outcome of a two-decade investment into the stock back in 2001.
| Start date: | 03/19/2001 |
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| End date: | 03/17/2021 | ||||
| Start price/share: | $25.69 | ||||
| End price/share: | $114.62 | ||||
| Starting shares: | 389.26 | ||||
| Ending shares: | 744.00 | ||||
| Dividends reinvested/share: | $39.19 | ||||
| Total return: | 752.77% | ||||
| Average annual return: | 11.31% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $85,297.96 | ||||
As shown above, the two-decade investment result worked out quite well, with an annualized rate of return of 11.31%. This would have turned a $10K investment made 20 years ago into $85,297.96 today (as of 03/17/2021). On a total return basis, that’s a result of 752.77% (something to think about: how might GPC shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Genuine Parts Co. paid investors a total of $39.19/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 3.26/share, we calculate that GPC has a current yield of approximately 2.84%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.26 against the original $25.69/share purchase price. This works out to a yield on cost of 11.05%.
Another great investment quote to think about:
“You can get in much more trouble with a good idea than a bad idea, because you forget that the good idea has limits.” — Benjamin Graham
