“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 UnitedHealth Group Inc (NYSE: UNH)? Today, we examine the outcome of a two-decade investment into the stock back in 2001.
|Average annual return:||18.68%|
As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 18.68%. This would have turned a $10K investment made 20 years ago into $307,435.86 today (as of 04/12/2021). On a total return basis, that’s a result of 2,973.36% (something to think about: how might UNH shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that UnitedHealth Group Inc paid investors a total of $25.21/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 5/share, we calculate that UNH has a current yield of approximately 1.33%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5 against the original $14.56/share purchase price. This works out to a yield on cost of 9.13%.
Here’s one more great investment quote before you go:
“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” — Charlie Munger