“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 Constellation Brands Inc (NYSE: STZ)? Today, we examine the outcome of a two-decade investment into the stock back in 2003.
| Start date: | 07/07/2003 |
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| End date: | 07/03/2023 | ||||
| Start price/share: | $14.64 | ||||
| End price/share: | $247.47 | ||||
| Starting shares: | 683.06 | ||||
| Ending shares: | 760.19 | ||||
| Dividends reinvested/share: | $21.01 | ||||
| Total return: | 1,781.25% | ||||
| Average annual return: | 15.80% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $188,081.35 | ||||
As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 15.80%. This would have turned a $10K investment made 20 years ago into $188,081.35 today (as of 07/03/2023). On a total return basis, that’s a result of 1,781.25% (something to think about: how might STZ shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Constellation Brands Inc paid investors a total of $21.01/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 3.56/share, we calculate that STZ has a current yield of approximately 1.44%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.56 against the original $14.64/share purchase price. This works out to a yield on cost of 9.84%.
One more investment quote to leave you with:
“Sometimes buying early on the way down looks like being wrong, but it isn’t.” — Seth Klarman
