“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Intel Corp (NASD: INTC)? Today, we examine the outcome of a two-decade investment into the stock back in 2002.
| Start date: | 01/07/2002 |
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| End date: | 01/05/2022 | ||||
| Start price/share: | $35.27 | ||||
| End price/share: | $53.87 | ||||
| Starting shares: | 283.53 | ||||
| Ending shares: | 461.11 | ||||
| Dividends reinvested/share: | $14.94 | ||||
| Total return: | 148.40% | ||||
| Average annual return: | 4.65% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $24,828.29 | ||||
As we can see, the two-decade investment result worked out as follows, with an annualized rate of return of 4.65%. This would have turned a $10K investment made 20 years ago into $24,828.29 today (as of 01/05/2022). On a total return basis, that’s a result of 148.40% (something to think about: how might INTC shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Intel Corp paid investors a total of $14.94/share in dividends over the 20 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 1.39/share, we calculate that INTC has a current yield of approximately 2.58%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.39 against the original $35.27/share purchase price. This works out to a yield on cost of 7.31%.
Another great investment quote to think about:
“Invest for the long haul. Don’t get too greedy and don’t get too scared.” — Shelby Davis
