“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 DuPont (NYSE: DD)? Today, we examine the outcome of a two-decade investment into the stock back in 2001.
| Start date: | 06/08/2001 |
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| End date: | 06/07/2021 | ||||
| Start price/share: | $72.89 | ||||
| End price/share: | $84.97 | ||||
| Starting shares: | 137.19 | ||||
| Ending shares: | 269.53 | ||||
| Dividends reinvested/share: | $52.66 | ||||
| Total return: | 129.02% | ||||
| Average annual return: | 4.23% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,911.42 | ||||
As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 4.23%. This would have turned a $10K investment made 20 years ago into $22,911.42 today (as of 06/07/2021). On a total return basis, that’s a result of 129.02% (something to think about: how might DD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that DuPont paid investors a total of $52.66/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 1.2/share, we calculate that DD has a current yield of approximately 1.41%. 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 $72.89/share purchase price. This works out to a yield on cost of 1.93%.
Another great investment quote to think about:
“The four most dangerous words in investing are: ‘this time it’s different.'” — Sir John Templeton
