“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 AmerisourceBergen Corp. (NYSE: ABC)? Today, we examine the outcome of a two-decade investment into the stock back in 2001.
| Start date: | 03/01/2001 |
|
|||
| End date: | 02/26/2021 | ||||
| Start price/share: | $13.54 | ||||
| End price/share: | $101.22 | ||||
| Starting shares: | 738.55 | ||||
| Ending shares: | 935.63 | ||||
| Dividends reinvested/share: | $14.00 | ||||
| Total return: | 847.04% | ||||
| Average annual return: | 11.89% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $94,643.94 | ||||
The above analysis shows the two-decade investment result worked out quite well, with an annualized rate of return of 11.89%. This would have turned a $10K investment made 20 years ago into $94,643.94 today (as of 02/26/2021). On a total return basis, that’s a result of 847.04% (something to think about: how might ABC shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that AmerisourceBergen Corp. paid investors a total of $14.00/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 1.76/share, we calculate that ABC has a current yield of approximately 1.74%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.76 against the original $13.54/share purchase price. This works out to a yield on cost of 12.85%.
One more investment quote to leave you with:
“People who invest make money for themselves; people who speculate make money for their brokers.” — Benjamin Graham
