“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 Darden Restaurants, Inc. (NYSE: DRI)? Today, we examine the outcome of a ten year investment into the stock back in 2012.
| Start date: | 12/17/2012 |
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| End date: | 12/15/2022 | ||||
| Start price/share: | $41.91 | ||||
| End price/share: | $142.86 | ||||
| Starting shares: | 238.61 | ||||
| Ending shares: | 325.27 | ||||
| Dividends reinvested/share: | $25.58 | ||||
| Total return: | 364.68% | ||||
| Average annual return: | 16.60% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $46,449.98 | ||||
As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 16.60%. This would have turned a $10K investment made 10 years ago into $46,449.98 today (as of 12/15/2022). On a total return basis, that’s a result of 364.68% (something to think about: how might DRI shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Darden Restaurants, Inc. paid investors a total of $25.58/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 4.84/share, we calculate that DRI has a current yield of approximately 3.39%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.84 against the original $41.91/share purchase price. This works out to a yield on cost of 8.09%.
Here’s one more great investment quote before you go:
“The right time for a company to finance its growth is not when it needs capital, but rather when the market is most receptive to providing capital.” — Michael Milken
