“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 Intel Corp (NASD: INTC)? Today, we examine the outcome of a twenty year investment into the stock back in 2004.
| Start date: | 07/22/2004 |
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| End date: | 07/19/2024 | ||||
| Start price/share: | $23.27 | ||||
| End price/share: | $32.98 | ||||
| Starting shares: | 429.74 | ||||
| Ending shares: | 741.29 | ||||
| Dividends reinvested/share: | $17.14 | ||||
| Total return: | 144.48% | ||||
| Average annual return: | 4.57% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $24,448.29 | ||||
As we can see, the twenty year investment result worked out as follows, with an annualized rate of return of 4.57%. This would have turned a $10K investment made 20 years ago into $24,448.29 today (as of 07/19/2024). On a total return basis, that’s a result of 144.48% (something to think about: how might INTC shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Intel Corp paid investors a total of $17.14/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 .5/share, we calculate that INTC has a current yield of approximately 1.52%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .5 against the original $23.27/share purchase price. This works out to a yield on cost of 6.53%.
One more investment quote to leave you with:
“A risk-reward ratio is important, but so is an aggravation-satisfaction ratio.” — Muriel Siebert
