“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten 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 ten year investment into the stock back in 2014.
| Start date: | 08/14/2014 |
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| End date: | 08/13/2024 | ||||
| Start price/share: | $57.88 | ||||
| End price/share: | $116.84 | ||||
| Starting shares: | 172.77 | ||||
| Ending shares: | 191.79 | ||||
| Dividends reinvested/share: | $13.63 | ||||
| Total return: | 124.09% | ||||
| Average annual return: | 8.40% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,412.21 | ||||
As we can see, the ten year investment result worked out well, with an annualized rate of return of 8.40%. This would have turned a $10K investment made 10 years ago into $22,412.21 today (as of 08/13/2024). On a total return basis, that’s a result of 124.09% (something to think about: how might DG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Dollar General Corp paid investors a total of $13.63/share in dividends over the 10 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 2.02%. 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 $57.88/share purchase price. This works out to a yield on cost of 3.49%.
One more piece of investment wisdom to leave you with:
“You can’t be a good value investor without being an independent thinker; you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value you do.” — Joel Greenblatt
