“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 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 Darden Restaurants, Inc. (NYSE: DRI)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.
| Start date: | 04/04/2002 |
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| End date: | 04/01/2022 | ||||
| Start price/share: | $22.80 | ||||
| End price/share: | $130.07 | ||||
| Starting shares: | 438.60 | ||||
| Ending shares: | 702.11 | ||||
| Dividends reinvested/share: | $28.69 | ||||
| Total return: | 813.23% | ||||
| Average annual return: | 11.69% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $91,288.77 | ||||
The above analysis shows the twenty year investment result worked out quite well, with an annualized rate of return of 11.69%. This would have turned a $10K investment made 20 years ago into $91,288.77 today (as of 04/01/2022). On a total return basis, that’s a result of 813.23% (something to think about: how might DRI shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Darden Restaurants, Inc. paid investors a total of $28.69/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 4.4/share, we calculate that DRI has a current yield of approximately 3.38%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.4 against the original $22.80/share purchase price. This works out to a yield on cost of 14.82%.
One more piece of investment wisdom to leave you with:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
