“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 DuPont (NYSE: DD)? Today, we examine the outcome of a decade-long investment into the stock back in 2012.
| Start date: | 01/24/2012 |
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| End date: | 01/21/2022 | ||||
| Start price/share: | $67.09 | ||||
| End price/share: | $77.47 | ||||
| Starting shares: | 149.05 | ||||
| Ending shares: | 197.77 | ||||
| Dividends reinvested/share: | $26.57 | ||||
| Total return: | 53.22% | ||||
| Average annual return: | 4.36% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,322.89 | ||||
The above analysis shows the decade-long investment result worked out as follows, with an annualized rate of return of 4.36%. This would have turned a $10K investment made 10 years ago into $15,322.89 today (as of 01/21/2022). On a total return basis, that’s a result of 53.22% (something to think about: how might DD shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that DuPont paid investors a total of $26.57/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 1.2/share, we calculate that DD has a current yield of approximately 1.55%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.2 against the original $67.09/share purchase price. This works out to a yield on cost of 2.31%.
Here’s one more great investment quote before you go:
“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” — Warren Buffett
