“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 Cincinnati Financial Corp. (NASD: CINF)? Today, we examine the outcome of a two-decade investment into the stock back in 2003.
| Start date: | 06/23/2003 |
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| End date: | 06/21/2023 | ||||
| Start price/share: | $33.70 | ||||
| End price/share: | $97.99 | ||||
| Starting shares: | 296.74 | ||||
| Ending shares: | 609.34 | ||||
| Dividends reinvested/share: | $37.30 | ||||
| Total return: | 497.09% | ||||
| Average annual return: | 9.34% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $59,689.80 | ||||
As we can see, the two-decade investment result worked out well, with an annualized rate of return of 9.34%. This would have turned a $10K investment made 20 years ago into $59,689.80 today (as of 06/21/2023). On a total return basis, that’s a result of 497.09% (something to think about: how might CINF shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Beyond share price change, another component of CINF’s total return these past 20 years has been the payment by Cincinnati Financial Corp. of $37.30/share in dividends to shareholders. Automatic reinvestment of dividends can be a wonderful way to compound returns, and for the above calculations we presume that dividends are reinvested into additional shares of stock. (For the purpose of these calcuations, the closing price on ex-date is used).
Based upon the most recent annualized dividend rate of 3/share, we calculate that CINF has a current yield of approximately 3.06%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3 against the original $33.70/share purchase price. This works out to a yield on cost of 9.08%.
One more piece of investment wisdom to leave you with:
“Value investing is at its core the marriage of a contrarian streak and a calculator.” — Seth Klarman
