“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 Estee Lauder Cos., Inc. (NYSE: EL)? Today, we examine the outcome of a ten year investment into the stock back in 2011.
| Start date: | 09/21/2011 |
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| End date: | 09/20/2021 | ||||
| Start price/share: | $49.80 | ||||
| End price/share: | $310.60 | ||||
| Starting shares: | 200.80 | ||||
| Ending shares: | 225.84 | ||||
| Dividends reinvested/share: | $12.90 | ||||
| Total return: | 601.45% | ||||
| Average annual return: | 21.49% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $70,124.30 | ||||
The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 21.49%. This would have turned a $10K investment made 10 years ago into $70,124.30 today (as of 09/20/2021). On a total return basis, that’s a result of 601.45% (something to think about: how might EL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Dividends are always an important investment factor to consider, and Estee Lauder Cos., Inc. has paid $12.90/share in dividends to shareholders over the past 10 years we looked at above. Many an investor will only invest in stocks that pay dividends, so this component of total return is always an important consideration. Automated reinvestment of dividends into additional shares of stock can be a great way for an investor to compound their returns. The above calculations are done with the assuption that dividends received over time are reinvested (the calcuations use the closing price on ex-date).
Based upon the most recent annualized dividend rate of 2.12/share, we calculate that EL has a current yield of approximately 0.68%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.12 against the original $49.80/share purchase price. This works out to a yield on cost of 1.37%.
Another great investment quote to think about:
“Twenty years in this business convinces me that any normal person using the customary three percent of the brain can pick stocks just as well, if not better, than the average Wall Street expert.” — Peter Lynch
