“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 twenty year 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 Sysco Corp (NYSE: SYY), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 11/04/2002 |
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| End date: | 11/02/2022 | ||||
| Start price/share: | $32.14 | ||||
| End price/share: | $81.45 | ||||
| Starting shares: | 311.14 | ||||
| Ending shares: | 534.41 | ||||
| Dividends reinvested/share: | $22.56 | ||||
| Total return: | 335.27% | ||||
| Average annual return: | 7.63% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $43,535.32 | ||||
The above analysis shows the twenty year investment result worked out well, with an annualized rate of return of 7.63%. This would have turned a $10K investment made 20 years ago into $43,535.32 today (as of 11/02/2022). On a total return basis, that’s a result of 335.27% (something to think about: how might SYY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Sysco Corp paid investors a total of $22.56/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 1.96/share, we calculate that SYY has a current yield of approximately 2.41%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.96 against the original $32.14/share purchase price. This works out to a yield on cost of 7.50%.
One more piece of investment wisdom to leave you with:
“A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price.” — Benjamin Graham
