“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 Estee Lauder Cos., Inc. (NYSE: EL)? Today, we examine the outcome of a ten year investment into the stock back in 2014.
| Start date: | 12/22/2014 |
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| End date: | 12/19/2024 | ||||
| Start price/share: | $76.10 | ||||
| End price/share: | $74.70 | ||||
| Starting shares: | 131.41 | ||||
| Ending shares: | 148.44 | ||||
| Dividends reinvested/share: | $18.11 | ||||
| Total return: | 10.88% | ||||
| Average annual return: | 1.04% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,090.05 | ||||
The above analysis shows the ten year investment result worked out as follows, with an annualized rate of return of 1.04%. This would have turned a $10K investment made 10 years ago into $11,090.05 today (as of 12/19/2024). On a total return basis, that’s a result of 10.88% (something to think about: how might EL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Estee Lauder Cos., Inc. paid investors a total of $18.11/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 1.4/share, we calculate that EL has a current yield of approximately 1.87%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.4 against the original $76.10/share purchase price. This works out to a yield on cost of 2.46%.
One more piece of investment wisdom to leave you with:
“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw, irrational emotion under control.” — Charlie Munger
