“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a two-decade holding period for an investor who was considering PerkinElmer, Inc. (NYSE: PKI) back in 2001, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 08/27/2001 |
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| End date: | 08/25/2021 | ||||
| Start price/share: | $31.26 | ||||
| End price/share: | $185.02 | ||||
| Starting shares: | 319.90 | ||||
| Ending shares: | 396.39 | ||||
| Dividends reinvested/share: | $5.53 | ||||
| Total return: | 633.40% | ||||
| Average annual return: | 10.47% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $73,323.39 | ||||
As shown above, the two-decade investment result worked out quite well, with an annualized rate of return of 10.47%. This would have turned a $10K investment made 20 years ago into $73,323.39 today (as of 08/25/2021). On a total return basis, that’s a result of 633.40% (something to think about: how might PKI shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that PerkinElmer, Inc. paid investors a total of $5.53/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 .28/share, we calculate that PKI has a current yield of approximately 0.15%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .28 against the original $31.26/share purchase price. This works out to a yield on cost of 0.48%.
More investment wisdom to ponder:
“Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.” — Charlie Munger
