“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 Eli Lilly (NYSE: LLY)? Today, we examine the outcome of a ten year investment into the stock back in 2012.
| Start date: | 05/02/2012 |
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| End date: | 04/29/2022 | ||||
| Start price/share: | $41.48 | ||||
| End price/share: | $292.13 | ||||
| Starting shares: | 241.08 | ||||
| Ending shares: | 314.95 | ||||
| Dividends reinvested/share: | $23.68 | ||||
| Total return: | 820.06% | ||||
| Average annual return: | 24.86% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $92,038.42 | ||||
As we can see, the ten year investment result worked out exceptionally well, with an annualized rate of return of 24.86%. This would have turned a $10K investment made 10 years ago into $92,038.42 today (as of 04/29/2022). On a total return basis, that’s a result of 820.06% (something to think about: how might LLY 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, Eli Lilly has paid $23.68/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 3.92/share, we calculate that LLY has a current yield of approximately 1.34%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.92 against the original $41.48/share purchase price. This works out to a yield on cost of 3.23%.
One more piece of investment wisdom to leave you with:
“Behind every stock is a company. Find out what it’s doing.” — Peter Lynch
