“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 Colgate-Palmolive Co. (NYSE: CL)? Today, we examine the outcome of a ten year investment into the stock back in 2011.
| Start date: | 12/29/2011 |
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| End date: | 12/28/2021 | ||||
| Start price/share: | $46.61 | ||||
| End price/share: | $84.46 | ||||
| Starting shares: | 214.55 | ||||
| Ending shares: | 270.13 | ||||
| Dividends reinvested/share: | $15.52 | ||||
| Total return: | 128.15% | ||||
| Average annual return: | 8.59% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,808.38 | ||||
As we can see, the ten year investment result worked out well, with an annualized rate of return of 8.59%. This would have turned a $10K investment made 10 years ago into $22,808.38 today (as of 12/28/2021). On a total return basis, that’s a result of 128.15% (something to think about: how might CL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Colgate-Palmolive Co. paid investors a total of $15.52/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 1.8/share, we calculate that CL has a current yield of approximately 2.13%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.8 against the original $46.61/share purchase price. This works out to a yield on cost of 4.57%.
One more piece of investment wisdom to leave you with:
“In the end, how your investments behave is much less important than how you behave.” — Benjamin Graham
