“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 twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Interpublic Group of Companies Inc. (NYSE: IPG)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.
| Start date: | 08/10/2001 |
|
|||
| End date: | 08/09/2021 | ||||
| Start price/share: | $27.88 | ||||
| End price/share: | $36.38 | ||||
| Starting shares: | 358.68 | ||||
| Ending shares: | 504.68 | ||||
| Dividends reinvested/share: | $6.87 | ||||
| Total return: | 83.60% | ||||
| Average annual return: | 3.08% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $18,349.85 | ||||
The above analysis shows the twenty year investment result worked out as follows, with an annualized rate of return of 3.08%. This would have turned a $10K investment made 20 years ago into $18,349.85 today (as of 08/09/2021). On a total return basis, that’s a result of 83.60% (something to think about: how might IPG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Interpublic Group of Companies Inc. paid investors a total of $6.87/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 1.08/share, we calculate that IPG has a current yield of approximately 2.97%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.08 against the original $27.88/share purchase price. This works out to a yield on cost of 10.65%.
One more piece of investment wisdom to leave you with:
“He who earns and does not invest will have to work for the rest of his life.” — Debasish Mridha
