“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 Colgate-Palmolive Co. (NYSE: CL)? Today, we examine the outcome of a ten year investment into the stock back in 2013.
| Start date: | 03/07/2013 |
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| End date: | 03/06/2023 | ||||
| Start price/share: | $57.71 | ||||
| End price/share: | $73.29 | ||||
| Starting shares: | 173.28 | ||||
| Ending shares: | 218.19 | ||||
| Dividends reinvested/share: | $16.32 | ||||
| Total return: | 59.91% | ||||
| Average annual return: | 4.80% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,983.38 | ||||
The above analysis shows the ten year investment result worked out as follows, with an annualized rate of return of 4.80%. This would have turned a $10K investment made 10 years ago into $15,983.38 today (as of 03/06/2023). On a total return basis, that’s a result of 59.91% (something to think about: how might CL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Colgate-Palmolive Co. paid investors a total of $16.32/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 1.88/share, we calculate that CL has a current yield of approximately 2.57%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.88 against the original $57.71/share purchase price. This works out to a yield on cost of 4.45%.
More investment wisdom to ponder:
“Value investing is at its core the marriage of a contrarian streak and a calculator.” — Seth Klarman
