“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Perrigo Company plc (NYSE: PRGO)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.
| Start date: | 10/29/2010 |
|
|||
| End date: | 10/28/2020 | ||||
| Start price/share: | $65.88 | ||||
| End price/share: | $42.58 | ||||
| Starting shares: | 151.79 | ||||
| Ending shares: | 162.98 | ||||
| Dividends reinvested/share: | $5.45 | ||||
| Total return: | -30.60% | ||||
| Average annual return: | -3.59% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $6,936.40 | ||||
As shown above, the decade-long investment result worked out poorly, with an annualized rate of return of -3.59%. This would have turned a $10K investment made 10 years ago into $6,936.40 today (as of 10/28/2020). On a total return basis, that’s a result of -30.60% (something to think about: how might PRGO shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Perrigo Company plc paid investors a total of $5.45/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 .9/share, we calculate that PRGO has a current yield of approximately 2.11%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .9 against the original $65.88/share purchase price. This works out to a yield on cost of 3.20%.
Here’s one more great investment quote before you go:
“Finding the best person or the best organization to invest your money is one of the most important financial decisions you’ll ever make.” — Bill Gross
