“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 two-decade 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 two-decade investment into the stock back in 2002.
| Start date: | 10/10/2002 |
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| End date: | 10/07/2022 | ||||
| Start price/share: | $50.54 | ||||
| End price/share: | $52.36 | ||||
| Starting shares: | 197.86 | ||||
| Ending shares: | 373.45 | ||||
| Dividends reinvested/share: | $50.21 | ||||
| Total return: | 95.54% | ||||
| Average annual return: | 3.41% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $19,558.28 | ||||
As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 3.41%. This would have turned a $10K investment made 20 years ago into $19,558.28 today (as of 10/07/2022). On a total return basis, that’s a result of 95.54% (something to think about: how might DD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that DuPont paid investors a total of $50.21/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 1.32/share, we calculate that DD has a current yield of approximately 2.52%. 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 $50.54/share purchase price. This works out to a yield on cost of 4.99%.
Here’s one more great investment quote before you go:
“Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.” — Peter Lynch
