“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a twenty year period?
Today, let’s look backwards in time to 2001, and take a look at what happened to investors who asked that very question about Globe Life Inc (NYSE: GL), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 09/17/2001 |
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| End date: | 09/16/2021 | ||||
| Start price/share: | $38.20 | ||||
| End price/share: | $91.85 | ||||
| Starting shares: | 261.78 | ||||
| Ending shares: | 316.55 | ||||
| Dividends reinvested/share: | $11.20 | ||||
| Total return: | 190.75% | ||||
| Average annual return: | 5.48% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $29,084.15 | ||||
The above analysis shows the twenty year investment result worked out well, with an annualized rate of return of 5.48%. This would have turned a $10K investment made 20 years ago into $29,084.15 today (as of 09/16/2021). On a total return basis, that’s a result of 190.75% (something to think about: how might GL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Globe Life Inc paid investors a total of $11.20/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 .79/share, we calculate that GL has a current yield of approximately 0.86%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .79 against the original $38.20/share purchase price. This works out to a yield on cost of 2.25%.
One more piece of investment wisdom to leave you with:
“All the opportunity in the world means nothing if you don’t actually pull the trigger.” — Sam Zell
