“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The investment philosophy practiced by Warren Buffett calls for investors to take a long-term horizon when making an investment, such as a decade-long holding period (or even longer), and reconsider making the investment in the first place if unable to envision holding the stock for at least five years. Today, we look at how such a long-term strategy would have done for investors in Target Corp (NYSE: TGT) back in 2012, holding through to today.
| Start date: | 02/28/2012 |
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| End date: | 02/25/2022 | ||||
| Start price/share: | $56.01 | ||||
| End price/share: | $199.22 | ||||
| Starting shares: | 178.54 | ||||
| Ending shares: | 235.42 | ||||
| Dividends reinvested/share: | $23.28 | ||||
| Total return: | 369.01% | ||||
| Average annual return: | 16.71% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $46,890.05 | ||||
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 16.71%. This would have turned a $10K investment made 10 years ago into $46,890.05 today (as of 02/25/2022). On a total return basis, that’s a result of 369.01% (something to think about: how might TGT shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Always an important consideration with a dividend-paying company is: should we reinvest our dividends?Over the past 10 years, Target Corp has paid $23.28/share in dividends. For the above analysis, we assume that the investor reinvests dividends into new shares of stock (for the above calculations, the reinvestment is performed using closing price on ex-div date for that dividend).
Based upon the most recent annualized dividend rate of 3.6/share, we calculate that TGT has a current yield of approximately 1.81%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.6 against the original $56.01/share purchase price. This works out to a yield on cost of 3.23%.
Here’s one more great investment quote before you go:
“You can’t be a good value investor without being an independent thinker; you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value you do.” — Joel Greenblatt
