“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 Kellogg Co (NYSE: K)? Today, we examine the outcome of a two-decade investment into the stock back in 2003.
| Start date: | 09/22/2003 |
|
|||
| End date: | 09/20/2023 | ||||
| Start price/share: | $33.54 | ||||
| End price/share: | $60.75 | ||||
| Starting shares: | 298.15 | ||||
| Ending shares: | 545.83 | ||||
| Dividends reinvested/share: | $35.38 | ||||
| Total return: | 231.59% | ||||
| Average annual return: | 6.17% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $33,132.18 | ||||
The above analysis shows the two-decade investment result worked out well, with an annualized rate of return of 6.17%. This would have turned a $10K investment made 20 years ago into $33,132.18 today (as of 09/20/2023). On a total return basis, that’s a result of 231.59% (something to think about: how might K shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Kellogg Co paid investors a total of $35.38/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 2.4/share, we calculate that K has a current yield of approximately 3.95%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.4 against the original $33.54/share purchase price. This works out to a yield on cost of 11.78%.
One more piece of investment wisdom to leave you with:
“Invest for the long haul. Don’t get too greedy and don’t get too scared.” — Shelby Davis
