“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 DuPont (NYSE: DD)? Today, we examine the outcome of a twenty year investment into the stock back in 2004.
| Start date: | 07/26/2004 |
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| End date: | 07/24/2024 | ||||
| Start price/share: | $77.21 | ||||
| End price/share: | $79.59 | ||||
| Starting shares: | 129.52 | ||||
| Ending shares: | 236.37 | ||||
| Dividends reinvested/share: | $48.03 | ||||
| Total return: | 88.13% | ||||
| Average annual return: | 3.21% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $18,816.91 | ||||
As we can see, the twenty year investment result worked out as follows, with an annualized rate of return of 3.21%. This would have turned a $10K investment made 20 years ago into $18,816.91 today (as of 07/24/2024). On a total return basis, that’s a result of 88.13% (something to think about: how might DD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that DuPont paid investors a total of $48.03/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 1.52/share, we calculate that DD has a current yield of approximately 1.91%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.52 against the original $77.21/share purchase price. This works out to a yield on cost of 2.47%.
More investment wisdom to ponder:
“Investors should purchase stocks like they purchase groceries, not like they purchase perfume.” — Benjamin Graham
