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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a ten year period?

Today, let’s look backwards in time to 2013, and take a look at what happened to investors who asked that very question about Dollar General Corp (NYSE: DG), by taking a look at the investment outcome over a ten year holding period.

Start date: 10/07/2013


End date: 10/04/2023
Start price/share: $57.14
End price/share: $107.03
Starting shares: 175.01
Ending shares: 190.73
Dividends reinvested/share: $11.27
Total return: 104.14%
Average annual return: 7.40%
Starting investment: $10,000.00
Ending investment: $20,415.40

As we can see, the ten year investment result worked out well, with an annualized rate of return of 7.40%. This would have turned a $10K investment made 10 years ago into $20,415.40 today (as of 10/04/2023). On a total return basis, that’s a result of 104.14% (something to think about: how might DG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Dollar General Corp paid investors a total of $11.27/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 2.36/share, we calculate that DG has a current yield of approximately 2.21%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.36 against the original $57.14/share purchase price. This works out to a yield on cost of 3.87%.

More investment wisdom to ponder:
“All intelligent investing is value investing: acquiring more that you are paying for. You must value the business in order to value the stock.” — Charlie Munger