“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The investment philosophy practiced by Warren Buffett calls for investors to take a long-term horizon when making an investment, such as a decade-long holding period (or even longer), and reconsider making the investment in the first place if unable to envision holding the stock for at least five years. Today, we look at how such a long-term strategy would have done for investors in Deere & Co. (NYSE: DE) back in 2014, holding through to today.
| Start date: | 09/05/2014 |
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| End date: | 09/04/2024 | ||||
| Start price/share: | $82.79 | ||||
| End price/share: | $391.95 | ||||
| Starting shares: | 120.79 | ||||
| Ending shares: | 145.66 | ||||
| Dividends reinvested/share: | $33.89 | ||||
| Total return: | 470.92% | ||||
| Average annual return: | 19.02% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $57,097.07 | ||||
The above analysis shows the decade-long investment result worked out exceptionally well, with an annualized rate of return of 19.02%. This would have turned a $10K investment made 10 years ago into $57,097.07 today (as of 09/04/2024). On a total return basis, that’s a result of 470.92% (something to think about: how might DE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Many investors out there refuse to own any stock that lacks a dividend; in the case of Deere & Co., investors have received $33.89/share in dividends these past 10 years examined in the exercise above. This means total return was driven not just by share price, but also by the dividends received (and what the investor did with those dividends). For this exercise, what we’ve done with the dividends is to assume they are reinvestted — i.e. used to purchase additional shares (the calculations use closing price on ex-date).
Based upon the most recent annualized dividend rate of 5.88/share, we calculate that DE has a current yield of approximately 1.50%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.88 against the original $82.79/share purchase price. This works out to a yield on cost of 1.81%.
Another great investment quote to think about:
“While it might seem that anyone can be a value investor, the essential characteristics of this type of investor-patience, discipline, and risk aversion-may well be genetically determined.” — Seth Klarman
