“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Affiliated Managers Group Inc. (NYSE: AMG)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.
| Start date: | 05/20/1999 |
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| End date: | 05/17/2019 | ||||
| Start price/share: | $20.96 | ||||
| End price/share: | $88.92 | ||||
| Starting shares: | 477.10 | ||||
| Ending shares: | 486.33 | ||||
| Dividends reinvested/share: | $2.64 | ||||
| Total return: | 332.45% | ||||
| Average annual return: | 7.59% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $43,212.78 | ||||
As we can see, the two-decade investment result worked out well, with an annualized rate of return of 7.59%. This would have turned a $10K investment made 20 years ago into $43,212.78 today (as of 05/17/2019). On a total return basis, that’s a result of 332.45% (something to think about: how might AMG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Affiliated Managers Group Inc. paid investors a total of $2.64/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 1.28/share, we calculate that AMG has a current yield of approximately 1.44%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.28 against the original $20.96/share purchase price. This works out to a yield on cost of 6.87%.
One more investment quote to leave you with:
“As time goes on, I get more and more convinced that the right method of investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes.” — John Maynard Keynes
