“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The investment philosophy practiced by Warren Buffett calls for investors to take a long-term horizon when making an investment, such as a decade-long holding period (or even longer), and reconsider making the investment in the first place if unable to envision holding the stock for at least five years. Today, we look at how such a long-term strategy would have done for investors in Goldman Sachs Group Inc (NYSE: GS) back in 2011, holding through to today.
| Start date: | 12/16/2011 |
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| End date: | 12/15/2021 | ||||
| Start price/share: | $90.10 | ||||
| End price/share: | $389.91 | ||||
| Starting shares: | 110.99 | ||||
| Ending shares: | 130.05 | ||||
| Dividends reinvested/share: | $32.92 | ||||
| Total return: | 407.09% | ||||
| Average annual return: | 17.62% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $50,722.18 | ||||
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 17.62%. This would have turned a $10K investment made 10 years ago into $50,722.18 today (as of 12/15/2021). On a total return basis, that’s a result of 407.09% (something to think about: how might GS shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Many investors out there refuse to own any stock that lacks a dividend; in the case of Goldman Sachs Group Inc, investors have received $32.92/share in dividends these past 10 years examined in the exercise above. This means total return was driven not just by share price, but also by the dividends received (and what the investor did with those dividends). For this exercise, what we’ve done with the dividends is to assume they are reinvestted — i.e. used to purchase additional shares (the calculations use closing price on ex-date).
Based upon the most recent annualized dividend rate of 8/share, we calculate that GS has a current yield of approximately 2.05%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 8 against the original $90.10/share purchase price. This works out to a yield on cost of 2.28%.
One more investment quote to leave you with:
“There’s a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions.” — Joel Greenblatt
