“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 Tractor Supply Co. (NASD: TSCO)? Today, we examine the outcome of a two-decade investment into the stock back in 2002.
| Start date: | 12/13/2002 |
|
|||
| End date: | 12/12/2022 | ||||
| Start price/share: | $5.15 | ||||
| End price/share: | $214.47 | ||||
| Starting shares: | 1,941.75 | ||||
| Ending shares: | 2,251.64 | ||||
| Dividends reinvested/share: | $14.36 | ||||
| Total return: | 4,729.08% | ||||
| Average annual return: | 21.38% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $482,908.47 | ||||
As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 21.38%. This would have turned a $10K investment made 20 years ago into $482,908.47 today (as of 12/12/2022). On a total return basis, that’s a result of 4,729.08% (something to think about: how might TSCO shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Tractor Supply Co. paid investors a total of $14.36/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 3.68/share, we calculate that TSCO has a current yield of approximately 1.72%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.68 against the original $5.15/share purchase price. This works out to a yield on cost of 33.40%.
One more investment quote to leave you with:
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” — Peter Lynch
