“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 Dollar General Corp (NYSE: DG)? Today, we examine the outcome of a ten year investment into the stock back in 2012.
| Start date: | 11/09/2012 |
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| End date: | 11/08/2022 | ||||
| Start price/share: | $46.99 | ||||
| End price/share: | $251.00 | ||||
| Starting shares: | 212.81 | ||||
| Ending shares: | 230.61 | ||||
| Dividends reinvested/share: | $10.13 | ||||
| Total return: | 478.83% | ||||
| Average annual return: | 19.19% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $57,890.47 | ||||
The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 19.19%. This would have turned a $10K investment made 10 years ago into $57,890.47 today (as of 11/08/2022). On a total return basis, that’s a result of 478.83% (something to think about: how might DG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Dollar General Corp paid investors a total of $10.13/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 2.2/share, we calculate that DG has a current yield of approximately 0.88%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.2 against the original $46.99/share purchase price. This works out to a yield on cost of 1.87%.
More investment wisdom to ponder:
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” — Benjamin Graham
