After my post yesterday on why most investors get terrible returns on their money, some of you wrote with questions about other companies. One of the related firms and most common requests was for Hershey Foods. I happened to already have the spreadsheet built so here is what I found.
If you went back 20 years ago and bought $100,000 worth of Hershey Food stock in 1991 through a tax-advantaged account, you would have been able to purchase a split-adjusted 10,775 shares at $9.28 each. Today, those shares trade for $56.37 per share plus you would have collected $17.01 in cash dividends per share throughout the twenty years you held your investment.
That means your stock would have a market value of $607,387 plus you would have $183,283 in cash from your dividends. That is $790,670 in total for a growth rate of 10.89% compounded annually.
What about inflation? Because $1.00 in 1991 is worth only $0.62 today as a result of inflation, this is the same as $490,215 in purchasing power. That is a real inflation-adjusted growth rate of 8.27% per year. That is the figure that should interest you - what counts is how much stuff you can buy for your family; food, clothes, medicine, furniture, cars, or collectible dolls on QVC ... whatever it is that floats your financial boat.
This is one of the reasons I constantly hammer the theme: Spend your life buying good quality assets that throw off cash so you can live off the passive income. If you had blown your $100,000 back in 1991 on depreciating consumer goods, you'd have nothing to show for it today. If, instead, you had used it to buy shares of Hershey Foods, you'd have the $790,670 in your account plus you'd be collecting $14,870 in cash dividends every year without touching your money. That is a lot of cash from Reese's Pieces, Rolos, Mr. Goodbars, Kit Kats, Twizzlers, Milk Duds, Whoppers, and chocolate bars.
Just like most great investments, there were several years when the stock fell by 40% or 50%. Between 1998 and 2000, for example, Hershey Foods lost 50.57% of its market value. But to paraphrase legendary investor Benjamin Graham, "The true investor is unlikely to think day to day, or even month to month fluctuations in the price of his stocks makes him richer or poorer." If you knew you didn't overpay and you didn't need to touch the money for a long period of time, those fluctuations were meaningless to you as earnings and dividends kept piling up over the years.