“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 Universal Health Services, Inc. (NYSE: UHS)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.
| Start date: | 11/22/1999 |
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| End date: | 11/21/2019 | ||||
| Start price/share: | $8.64 | ||||
| End price/share: | $140.59 | ||||
| Starting shares: | 1,157.41 | ||||
| Ending shares: | 1,259.21 | ||||
| Dividends reinvested/share: | $4.49 | ||||
| Total return: | 1,670.32% | ||||
| Average annual return: | 15.44% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $176,933.36 | ||||
The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 15.44%. This would have turned a $10K investment made 20 years ago into $176,933.36 today (as of 11/21/2019). On a total return basis, that’s a result of 1,670.32% (something to think about: how might UHS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Universal Health Services, Inc. paid investors a total of $4.49/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 .8/share, we calculate that UHS has a current yield of approximately 0.57%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .8 against the original $8.64/share purchase price. This works out to a yield on cost of 6.60%.
More investment wisdom to ponder:
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” — George Soros
