“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 Walt Disney Co. (NYSE: DIS)? Today, we examine the outcome of a two-decade investment into the stock back in 2004.
| Start date: | 06/17/2004 |
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| End date: | 06/14/2024 | ||||
| Start price/share: | $24.52 | ||||
| End price/share: | $99.97 | ||||
| Starting shares: | 407.83 | ||||
| Ending shares: | 501.44 | ||||
| Dividends reinvested/share: | $13.88 | ||||
| Total return: | 401.29% | ||||
| Average annual return: | 8.39% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $50,115.96 | ||||
The above analysis shows the two-decade investment result worked out well, with an annualized rate of return of 8.39%. This would have turned a $10K investment made 20 years ago into $50,115.96 today (as of 06/14/2024). On a total return basis, that’s a result of 401.29% (something to think about: how might DIS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Walt Disney Co. paid investors a total of $13.88/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 .90/share, we calculate that DIS has a current yield of approximately 0.90%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .90 against the original $24.52/share purchase price. This works out to a yield on cost of 3.67%.
One more piece of investment wisdom to leave you with:
“You can get in much more trouble with a good idea than a bad idea, because you forget that the good idea has limits.” — Benjamin Graham
