“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 Delta Air Lines Inc (NYSE: DAL)? Today, we examine the outcome of a decade-long investment into the stock back in 2012.
| Start date: | 06/11/2012 |
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| End date: | 06/09/2022 | ||||
| Start price/share: | $10.17 | ||||
| End price/share: | $36.75 | ||||
| Starting shares: | 983.28 | ||||
| Ending shares: | 1,106.79 | ||||
| Dividends reinvested/share: | $5.78 | ||||
| Total return: | 306.75% | ||||
| Average annual return: | 15.06% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $40,667.15 | ||||
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 15.06%. This would have turned a $10K investment made 10 years ago into $40,667.15 today (as of 06/09/2022). On a total return basis, that’s a result of 306.75% (something to think about: how might DAL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Delta Air Lines Inc paid investors a total of $5.78/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 1.61/share, we calculate that DAL has a current yield of approximately 4.38%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.61 against the original $10.17/share purchase price. This works out to a yield on cost of 43.07%.
One more piece of investment wisdom to leave you with:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
