“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Delta Air Lines Inc (NYSE: DAL)? Today, we examine the outcome of a decade-long investment into the stock back in 2013.
| Start date: | 09/16/2013 |
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| End date: | 09/13/2023 | ||||
| Start price/share: | $23.15 | ||||
| End price/share: | $39.55 | ||||
| Starting shares: | 431.97 | ||||
| Ending shares: | 485.88 | ||||
| Dividends reinvested/share: | $5.82 | ||||
| Total return: | 92.17% | ||||
| Average annual return: | 6.75% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $19,213.26 | ||||
As shown above, the decade-long investment result worked out well, with an annualized rate of return of 6.75%. This would have turned a $10K investment made 10 years ago into $19,213.26 today (as of 09/13/2023). On a total return basis, that’s a result of 92.17% (something to think about: how might DAL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Delta Air Lines Inc paid investors a total of $5.82/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 .4/share, we calculate that DAL has a current yield of approximately 1.01%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .4 against the original $23.15/share purchase price. This works out to a yield on cost of 4.36%.
More investment wisdom to ponder:
“Value investing means really asking what are the best values, and not assuming that because something looks expensive that it is, or assuming that because a stock is down in price and trades at low multiples that it is a bargain.” — Bill Miller
