“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 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 Darden Restaurants, Inc. (NYSE: DRI)? Today, we examine the outcome of a two-decade investment into the stock back in 2001.
| Start date: | 09/17/2001 |
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| End date: | 09/16/2021 | ||||
| Start price/share: | $14.82 | ||||
| End price/share: | $150.30 | ||||
| Starting shares: | 674.76 | ||||
| Ending shares: | 1,065.98 | ||||
| Dividends reinvested/share: | $26.51 | ||||
| Total return: | 1,502.17% | ||||
| Average annual return: | 14.87% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $160,247.85 | ||||
The above analysis shows the two-decade investment result worked out quite well, with an annualized rate of return of 14.87%. This would have turned a $10K investment made 20 years ago into $160,247.85 today (as of 09/16/2021). On a total return basis, that’s a result of 1,502.17% (something to think about: how might DRI shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Darden Restaurants, Inc. paid investors a total of $26.51/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 4.4/share, we calculate that DRI has a current yield of approximately 2.93%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.4 against the original $14.82/share purchase price. This works out to a yield on cost of 19.77%.
More investment wisdom to ponder:
“In the end, how your investments behave is much less important than how you behave.” — Benjamin Graham
