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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— 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 two-decade period?

Today, let’s look backwards in time to 2002, and take a look at what happened to investors who asked that very question about Ralph Lauren Corp (NYSE: RL), by taking a look at the investment outcome over a two-decade holding period.

Start date: 08/12/2002


End date: 08/10/2022
Start price/share: $22.09
End price/share: $95.52
Starting shares: 452.69
Ending shares: 563.05
Dividends reinvested/share: $23.10
Total return: 437.82%
Average annual return: 8.77%
Starting investment: $10,000.00
Ending investment: $53,762.89

The above analysis shows the two-decade investment result worked out well, with an annualized rate of return of 8.77%. This would have turned a $10K investment made 20 years ago into $53,762.89 today (as of 08/10/2022). On a total return basis, that’s a result of 437.82% (something to think about: how might RL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Ralph Lauren Corp paid investors a total of $23.10/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/share, we calculate that RL has a current yield of approximately 3.14%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3 against the original $22.09/share purchase price. This works out to a yield on cost of 14.21%.

One more investment quote to leave you with:
“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” — Mark Cuban