“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 DuPont (NYSE: DD)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.
| Start date: | 02/07/2002 |
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| End date: | 02/04/2022 | ||||
| Start price/share: | $58.98 | ||||
| End price/share: | $76.06 | ||||
| Starting shares: | 169.55 | ||||
| Ending shares: | 325.70 | ||||
| Dividends reinvested/share: | $51.24 | ||||
| Total return: | 147.73% | ||||
| Average annual return: | 4.64% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $24,777.79 | ||||
The above analysis shows the twenty year investment result worked out as follows, with an annualized rate of return of 4.64%. This would have turned a $10K investment made 20 years ago into $24,777.79 today (as of 02/04/2022). On a total return basis, that’s a result of 147.73% (something to think about: how might DD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that DuPont paid investors a total of $51.24/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 1.2/share, we calculate that DD has a current yield of approximately 1.58%. 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 $58.98/share purchase price. This works out to a yield on cost of 2.68%.
More investment wisdom to ponder:
“The policy of being too cautious is the greatest risk of all.” — Jawaharlal Nehru
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