“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 Analog Devices Inc (NASD: ADI)? Today, we examine the outcome of a twenty year investment into the stock back in 2004.
| Start date: | 04/23/2004 |
|
|||
| End date: | 04/22/2024 | ||||
| Start price/share: | $47.62 | ||||
| End price/share: | $186.31 | ||||
| Starting shares: | 210.00 | ||||
| Ending shares: | 331.18 | ||||
| Dividends reinvested/share: | $31.11 | ||||
| Total return: | 517.01% | ||||
| Average annual return: | 9.52% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $61,702.32 | ||||
As shown above, the twenty year investment result worked out well, with an annualized rate of return of 9.52%. This would have turned a $10K investment made 20 years ago into $61,702.32 today (as of 04/22/2024). On a total return basis, that’s a result of 517.01% (something to think about: how might ADI shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Analog Devices Inc paid investors a total of $31.11/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 3.68/share, we calculate that ADI has a current yield of approximately 1.98%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.68 against the original $47.62/share purchase price. This works out to a yield on cost of 4.16%.
One more piece of investment wisdom to leave you with:
“I’d like to live as a poor man with lots of money.” — Pablo Picasso
