“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a ten year period?
Today, let’s look backwards in time to 2012, and take a look at what happened to investors who asked that very question about McCormick & Co Inc (NYSE: MKC), by taking a look at the investment outcome over a ten year holding period.
| Start date: | 07/20/2012 |
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| End date: | 07/19/2022 | ||||
| Start price/share: | $30.44 | ||||
| End price/share: | $81.96 | ||||
| Starting shares: | 328.52 | ||||
| Ending shares: | 392.81 | ||||
| Dividends reinvested/share: | $10.06 | ||||
| Total return: | 221.95% | ||||
| Average annual return: | 12.40% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $32,196.02 | ||||
The above analysis shows the ten year investment result worked out quite well, with an annualized rate of return of 12.40%. This would have turned a $10K investment made 10 years ago into $32,196.02 today (as of 07/19/2022). On a total return basis, that’s a result of 221.95% (something to think about: how might MKC shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that McCormick & Co Inc paid investors a total of $10.06/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 1.48/share, we calculate that MKC 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 1.48 against the original $30.44/share purchase price. This works out to a yield on cost of 5.95%.
Here’s one more great investment quote before you go:
“A risk-reward ratio is important, but so is an aggravation-satisfaction ratio.” — Muriel Siebert
