“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 ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Nike (NYSE: NKE)? Today, we examine the outcome of a ten year investment into the stock back in 2014.
| Start date: | 09/02/2014 |
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| End date: | 08/29/2024 | ||||
| Start price/share: | $39.64 | ||||
| End price/share: | $83.26 | ||||
| Starting shares: | 252.27 | ||||
| Ending shares: | 281.03 | ||||
| Dividends reinvested/share: | $9.37 | ||||
| Total return: | 133.98% | ||||
| Average annual return: | 8.88% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $23,408.84 | ||||
As we can see, the ten year investment result worked out well, with an annualized rate of return of 8.88%. This would have turned a $10K investment made 10 years ago into $23,408.84 today (as of 08/29/2024). On a total return basis, that’s a result of 133.98% (something to think about: how might NKE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Nike paid investors a total of $9.37/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 1.48/share, we calculate that NKE has a current yield of approximately 1.78%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.48 against the original $39.64/share purchase price. This works out to a yield on cost of 4.49%.
Another great investment quote to think about:
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher
