“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 AFLAC Inc (NYSE: AFL)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.
| Start date: | 02/19/2002 |
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| End date: | 02/16/2022 | ||||
| Start price/share: | $12.57 | ||||
| End price/share: | $64.52 | ||||
| Starting shares: | 795.54 | ||||
| Ending shares: | 1,206.61 | ||||
| Dividends reinvested/share: | $13.13 | ||||
| Total return: | 678.50% | ||||
| Average annual return: | 10.80% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $77,810.69 | ||||
As we can see, the twenty year investment result worked out quite well, with an annualized rate of return of 10.80%. This would have turned a $10K investment made 20 years ago into $77,810.69 today (as of 02/16/2022). On a total return basis, that’s a result of 678.50% (something to think about: how might AFL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that AFLAC Inc paid investors a total of $13.13/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 1.6/share, we calculate that AFL has a current yield of approximately 2.48%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.6 against the original $12.57/share purchase price. This works out to a yield on cost of 19.73%.
Another great investment quote to think about:
“Smart investing doesn’t consist of buying good assets but of buying assets well. This is a very, very important distinction that very, very few people understand.” — Howard Marks
