“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 Target Corp (NYSE: TGT)? Today, we examine the outcome of a ten year investment into the stock back in 2014.
| Start date: | 08/22/2014 |
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| End date: | 08/21/2024 | ||||
| Start price/share: | $61.05 | ||||
| End price/share: | $159.25 | ||||
| Starting shares: | 163.80 | ||||
| Ending shares: | 217.01 | ||||
| Dividends reinvested/share: | $30.04 | ||||
| Total return: | 245.59% | ||||
| Average annual return: | 13.19% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $34,544.22 | ||||
As shown above, the ten year investment result worked out quite well, with an annualized rate of return of 13.19%. This would have turned a $10K investment made 10 years ago into $34,544.22 today (as of 08/21/2024). On a total return basis, that’s a result of 245.59% (something to think about: how might TGT shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Target Corp paid investors a total of $30.04/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 4.48/share, we calculate that TGT has a current yield of approximately 2.81%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.48 against the original $61.05/share purchase price. This works out to a yield on cost of 4.60%.
More investment wisdom to ponder:
“Sentimentality about an investments leads to lack of discipline.” — Sam Zell
