“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into DuPont (NYSE: DD)? Today, we examine the outcome of a ten year investment into the stock back in 2011.
| Start date: | 05/20/2011 |
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| End date: | 05/19/2021 | ||||
| Start price/share: | $72.38 | ||||
| End price/share: | $84.24 | ||||
| Starting shares: | 138.16 | ||||
| Ending shares: | 186.08 | ||||
| Dividends reinvested/share: | $27.17 | ||||
| Total return: | 56.75% | ||||
| Average annual return: | 4.59% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,667.81 | ||||
As we can see, the ten year investment result worked out as follows, with an annualized rate of return of 4.59%. This would have turned a $10K investment made 10 years ago into $15,667.81 today (as of 05/19/2021). On a total return basis, that’s a result of 56.75% (something to think about: how might DD shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that DuPont paid investors a total of $27.17/share in dividends over the 10 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 1.2/share, we calculate that DD has a current yield of approximately 1.42%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.2 against the original $72.38/share purchase price. This works out to a yield on cost of 1.96%.
One more investment quote to leave you with:
“Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.” — Peter Lynch
