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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— Warren Buffett

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a twenty year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Hormel Foods Corp. (NYSE: HRL) back in 2003: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.

Start date: 01/13/2003


End date: 01/11/2023
Start price/share: $5.82
End price/share: $46.82
Starting shares: 1,718.21
Ending shares: 2,501.04
Dividends reinvested/share: $8.82
Total return: 1,070.99%
Average annual return: 13.09%
Starting investment: $10,000.00
Ending investment: $117,198.81

As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 13.09%. This would have turned a $10K investment made 20 years ago into $117,198.81 today (as of 01/11/2023). On a total return basis, that’s a result of 1,070.99% (something to think about: how might HRL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Hormel Foods Corp. paid investors a total of $8.82/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 1.1/share, we calculate that HRL has a current yield of approximately 2.35%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.1 against the original $5.82/share purchase price. This works out to a yield on cost of 40.38%.

One more piece of investment wisdom to leave you with:
“Buy not on optimism, but on arithmetic.” — Benjamin Graham