“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Cardinal Health, Inc. (NYSE: CAH)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.
| Start date: | 12/12/2011 |
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| End date: | 12/09/2021 | ||||
| Start price/share: | $41.14 | ||||
| End price/share: | $48.48 | ||||
| Starting shares: | 243.07 | ||||
| Ending shares: | 320.69 | ||||
| Dividends reinvested/share: | $15.98 | ||||
| Total return: | 55.47% | ||||
| Average annual return: | 4.51% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,544.56 | ||||
As shown above, the decade-long investment result worked out as follows, with an annualized rate of return of 4.51%. This would have turned a $10K investment made 10 years ago into $15,544.56 today (as of 12/09/2021). On a total return basis, that’s a result of 55.47% (something to think about: how might CAH shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Cardinal Health, Inc. paid investors a total of $15.98/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 1.9632/share, we calculate that CAH has a current yield of approximately 4.05%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.9632 against the original $41.14/share purchase price. This works out to a yield on cost of 9.84%.
One more piece of investment wisdom to leave you with:
“The policy of being too cautious is the greatest risk of all.” — Jawaharlal Nehru
