“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 J.M. Smucker Co. (NYSE: SJM)? Today, we examine the outcome of a ten year investment into the stock back in 2011.
| Start date: | 06/28/2011 |
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| End date: | 06/25/2021 | ||||
| Start price/share: | $75.96 | ||||
| End price/share: | $129.42 | ||||
| Starting shares: | 131.65 | ||||
| Ending shares: | 170.47 | ||||
| Dividends reinvested/share: | $28.20 | ||||
| Total return: | 120.62% | ||||
| Average annual return: | 8.23% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,053.45 | ||||
The above analysis shows the ten year investment result worked out well, with an annualized rate of return of 8.23%. This would have turned a $10K investment made 10 years ago into $22,053.45 today (as of 06/25/2021). On a total return basis, that’s a result of 120.62% (something to think about: how might SJM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that J.M. Smucker Co. paid investors a total of $28.20/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 3.6/share, we calculate that SJM has a current yield of approximately 2.78%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.6 against the original $75.96/share purchase price. This works out to a yield on cost of 3.66%.
One more piece of investment wisdom to leave you with:
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher
