“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 decade-long 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 decade-long investment into the stock back in 2012.
| Start date: | 05/21/2012 |
|
|||
| End date: | 05/18/2022 | ||||
| Start price/share: | $61.38 | ||||
| End price/share: | $64.28 | ||||
| Starting shares: | 162.92 | ||||
| Ending shares: | 215.51 | ||||
| Dividends reinvested/share: | $26.39 | ||||
| Total return: | 38.53% | ||||
| Average annual return: | 3.31% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $13,847.93 | ||||
As we can see, the decade-long investment result worked out as follows, with an annualized rate of return of 3.31%. This would have turned a $10K investment made 10 years ago into $13,847.93 today (as of 05/18/2022). On a total return basis, that’s a result of 38.53% (something to think about: how might DD shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that DuPont paid investors a total of $26.39/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 1.32/share, we calculate that DD has a current yield of approximately 2.05%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.32 against the original $61.38/share purchase price. This works out to a yield on cost of 3.34%.
Another great investment quote to think about:
“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw, irrational emotion under control.” — Charlie Munger
