“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Royal Caribbean Group (NYSE: RCL)? Today, we examine the outcome of a ten year investment into the stock back in 2012.
| Start date: | 03/26/2012 |
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| End date: | 03/24/2022 | ||||
| Start price/share: | $30.30 | ||||
| End price/share: | $76.87 | ||||
| Starting shares: | 330.03 | ||||
| Ending shares: | 389.21 | ||||
| Dividends reinvested/share: | $13.74 | ||||
| Total return: | 199.18% | ||||
| Average annual return: | 11.58% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $29,913.25 | ||||
As shown above, the ten year investment result worked out quite well, with an annualized rate of return of 11.58%. This would have turned a $10K investment made 10 years ago into $29,913.25 today (as of 03/24/2022). On a total return basis, that’s a result of 199.18% (something to think about: how might RCL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Royal Caribbean Group paid investors a total of $13.74/share in dividends over the 10 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 3.12/share, we calculate that RCL has a current yield of approximately 4.06%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.12 against the original $30.30/share purchase price. This works out to a yield on cost of 13.40%.
More investment wisdom to ponder:
“Only when the tide goes out do you discover who’s been swimming naked.” — Warren Buffett
