“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 Ralph Lauren Corp (NYSE: RL)? Today, we examine the outcome of a ten year investment into the stock back in 2011.
| Start date: | 09/20/2011 |
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| End date: | 09/17/2021 | ||||
| Start price/share: | $151.77 | ||||
| End price/share: | $113.04 | ||||
| Starting shares: | 65.89 | ||||
| Ending shares: | 76.96 | ||||
| Dividends reinvested/share: | $18.09 | ||||
| Total return: | -13.00% | ||||
| Average annual return: | -1.38% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $8,702.62 | ||||
As shown above, the ten year investment result worked out poorly, with an annualized rate of return of -1.38%. This would have turned a $10K investment made 10 years ago into $8,702.62 today (as of 09/17/2021). On a total return basis, that’s a result of -13.00% (something to think about: how might RL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Ralph Lauren Corp paid investors a total of $18.09/share in dividends over the 10 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 2.75/share, we calculate that RL has a current yield of approximately 2.43%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.75 against the original $151.77/share purchase price. This works out to a yield on cost of 1.60%.
More investment wisdom to ponder:
“Cash is a fact, profit is an opinion.” — Alfred Rappaport
