“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Dollar General Corp (NYSE: DG)? Today, we examine the outcome of a five year investment into the stock back in 2019.
| Start date: | 07/30/2019 |
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| End date: | 07/29/2024 | ||||
| Start price/share: | $134.20 | ||||
| End price/share: | $117.36 | ||||
| Starting shares: | 74.52 | ||||
| Ending shares: | 78.36 | ||||
| Dividends reinvested/share: | $8.91 | ||||
| Total return: | -8.04% | ||||
| Average annual return: | -1.66% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,196.68 | ||||
As we can see, the five year investment result worked out poorly, with an annualized rate of return of -1.66%. This would have turned a $10K investment made 5 years ago into $9,196.68 today (as of 07/29/2024). On a total return basis, that’s a result of -8.04% (something to think about: how might DG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Dollar General Corp paid investors a total of $8.91/share in dividends over the 5 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 2.36/share, we calculate that DG has a current yield of approximately 2.01%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.36 against the original $134.20/share purchase price. This works out to a yield on cost of 1.50%.
Here’s one more great investment quote before you go:
“Invest for the long haul. Don’t get too greedy and don’t get too scared.” — Shelby Davis
