“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The investment philosophy practiced by Warren Buffett calls for investors to take a long-term horizon when making an investment, such as a decade-long holding period (or even longer), and reconsider making the investment in the first place if unable to envision holding the stock for at least five years. Today, we look at how such a long-term strategy would have done for investors in Carnival Corp (NYSE: CCL) back in 2012, holding through to today.
| Start date: | 10/08/2012 |
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| End date: | 10/05/2022 | ||||
| Start price/share: | $37.15 | ||||
| End price/share: | $7.43 | ||||
| Starting shares: | 269.18 | ||||
| Ending shares: | 339.58 | ||||
| Dividends reinvested/share: | $11.25 | ||||
| Total return: | -74.77% | ||||
| Average annual return: | -12.87% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $2,522.56 | ||||
The above analysis shows the decade-long investment result worked out poorly, with an annualized rate of return of -12.87%. This would have turned a $10K investment made 10 years ago into $2,522.56 today (as of 10/05/2022). On a total return basis, that’s a result of -74.77% (something to think about: how might CCL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Always an important consideration with a dividend-paying company is: should we reinvest our dividends?Over the past 10 years, Carnival Corp has paid $11.25/share in dividends. For the above analysis, we assume that the investor reinvests dividends into new shares of stock (for the above calculations, the reinvestment is performed using closing price on ex-div date for that dividend).
Based upon the most recent annualized dividend rate of 2/share, we calculate that CCL has a current yield of approximately 26.92%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2 against the original $37.15/share purchase price. This works out to a yield on cost of 72.46%.
Here’s one more great investment quote before you go:
“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” — Peter Lynch
