“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 Molson Coors Beverage Co (NYSE: TAP)? Today, we examine the outcome of a two-decade investment into the stock back in 2004.
| Start date: | 06/18/2004 |
|
|||
| End date: | 06/17/2024 | ||||
| Start price/share: | $34.63 | ||||
| End price/share: | $50.20 | ||||
| Starting shares: | 288.77 | ||||
| Ending shares: | 447.80 | ||||
| Dividends reinvested/share: | $23.78 | ||||
| Total return: | 124.79% | ||||
| Average annual return: | 4.13% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,475.53 | ||||
As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 4.13%. This would have turned a $10K investment made 20 years ago into $22,475.53 today (as of 06/17/2024). On a total return basis, that’s a result of 124.79% (something to think about: how might TAP shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Molson Coors Beverage Co paid investors a total of $23.78/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 1.76/share, we calculate that TAP has a current yield of approximately 3.51%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.76 against the original $34.63/share purchase price. This works out to a yield on cost of 10.14%.
Another great investment quote to think about:
“If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.” — Peter Lynch
