“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 Royal Caribbean Group (NYSE: RCL)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.
| Start date: | 06/03/2002 |
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| End date: | 06/01/2022 | ||||
| Start price/share: | $22.50 | ||||
| End price/share: | $55.57 | ||||
| Starting shares: | 444.44 | ||||
| Ending shares: | 594.24 | ||||
| Dividends reinvested/share: | $17.68 | ||||
| Total return: | 230.22% | ||||
| Average annual return: | 6.15% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $33,007.53 | ||||
The above analysis shows the twenty year investment result worked out well, with an annualized rate of return of 6.15%. This would have turned a $10K investment made 20 years ago into $33,007.53 today (as of 06/01/2022). On a total return basis, that’s a result of 230.22% (something to think about: how might RCL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Royal Caribbean Group paid investors a total of $17.68/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 3.12/share, we calculate that RCL has a current yield of approximately 5.61%. 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 $22.50/share purchase price. This works out to a yield on cost of 24.93%.
More investment wisdom to ponder:
“The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you’re wrong.” — William O’Neil
