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“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


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