“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 twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Cardinal Health, Inc. (NYSE: CAH)? Today, we examine the outcome of a twenty year investment into the stock back in 2004.
| Start date: | 05/06/2004 |
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| End date: | 05/03/2024 | ||||
| Start price/share: | $75.98 | ||||
| End price/share: | $98.91 | ||||
| Starting shares: | 131.61 | ||||
| Ending shares: | 280.75 | ||||
| Dividends reinvested/share: | $34.24 | ||||
| Total return: | 177.69% | ||||
| Average annual return: | 5.24% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $27,780.39 | ||||
The above analysis shows the twenty year investment result worked out well, with an annualized rate of return of 5.24%. This would have turned a $10K investment made 20 years ago into $27,780.39 today (as of 05/03/2024). On a total return basis, that’s a result of 177.69% (something to think about: how might CAH shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Cardinal Health, Inc. paid investors a total of $34.24/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 2.0024/share, we calculate that CAH has a current yield of approximately 2.02%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.0024 against the original $75.98/share purchase price. This works out to a yield on cost of 2.66%.
Here’s one more great investment quote before you go:
“Behind every stock is a company. Find out what it’s doing.” — Peter Lynch
