“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 twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Deere & Co. (NYSE: DE)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.
| Start date: | 02/04/2002 |
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| End date: | 02/03/2022 | ||||
| Start price/share: | $22.10 | ||||
| End price/share: | $370.89 | ||||
| Starting shares: | 452.49 | ||||
| Ending shares: | 677.12 | ||||
| Dividends reinvested/share: | $34.98 | ||||
| Total return: | 2,411.37% | ||||
| Average annual return: | 17.48% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $251,214.95 | ||||
As we can see, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 17.48%. This would have turned a $10K investment made 20 years ago into $251,214.95 today (as of 02/03/2022). On a total return basis, that’s a result of 2,411.37% (something to think about: how might DE shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Beyond share price change, another component of DE’s total return these past 20 years has been the payment by Deere & Co. of $34.98/share in dividends to shareholders. Automatic reinvestment of dividends can be a wonderful way to compound returns, and for the above calculations we presume that dividends are reinvested into additional shares of stock. (For the purpose of these calcuations, the closing price on ex-date is used).
Based upon the most recent annualized dividend rate of 4.2/share, we calculate that DE has a current yield of approximately 1.13%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.2 against the original $22.10/share purchase price. This works out to a yield on cost of 5.11%.
Here’s one more great investment quote before you go:
“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.” — Warren Buffett
