“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 ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Home Depot Inc (NYSE: HD)? Today, we examine the outcome of a ten year investment into the stock back in 2014.
| Start date: | 02/27/2014 |
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| End date: | 02/26/2024 | ||||
| Start price/share: | $81.97 | ||||
| End price/share: | $371.60 | ||||
| Starting shares: | 122.00 | ||||
| Ending shares: | 153.68 | ||||
| Dividends reinvested/share: | $48.68 | ||||
| Total return: | 471.08% | ||||
| Average annual return: | 19.03% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $57,117.82 | ||||
The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 19.03%. This would have turned a $10K investment made 10 years ago into $57,117.82 today (as of 02/26/2024). On a total return basis, that’s a result of 471.08% (something to think about: how might HD shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Home Depot Inc paid investors a total of $48.68/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 9/share, we calculate that HD has a current yield of approximately 2.42%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 9 against the original $81.97/share purchase price. This works out to a yield on cost of 2.95%.
One more piece of investment wisdom to leave you with:
“I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.” — Charlie Munger
