“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 Clorox Co (NYSE: CLX)? Today, we examine the outcome of a twenty year investment into the stock back in 2004.
| Start date: | 08/06/2004 |
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| End date: | 08/05/2024 | ||||
| Start price/share: | $50.14 | ||||
| End price/share: | $142.67 | ||||
| Starting shares: | 199.44 | ||||
| Ending shares: | 344.18 | ||||
| Dividends reinvested/share: | $57.61 | ||||
| Total return: | 391.04% | ||||
| Average annual return: | 8.28% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $49,129.64 | ||||
The above analysis shows the twenty year investment result worked out well, with an annualized rate of return of 8.28%. This would have turned a $10K investment made 20 years ago into $49,129.64 today (as of 08/05/2024). On a total return basis, that’s a result of 391.04% (something to think about: how might CLX shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Clorox Co paid investors a total of $57.61/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 4.88/share, we calculate that CLX has a current yield of approximately 3.42%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.88 against the original $50.14/share purchase price. This works out to a yield on cost of 6.82%.
Here’s one more great investment quote before you go:
“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.” — William Feather
