Domino's Pizza Enterprises Ltd. (ASX: DMP) is the company that surprised everyone.
From its humble beginning back in the 1960's – at which time it was called DomiNick's – the Michigan-based pizza business soon spread around the globe only to become the world's biggest pizza delivery company by the year 2000. It is also the No.1 pizza company in Australia, and could even be considered our best digital retailer with more and more orders being made online.
The company's growth has been remarkable, and it's certainly been reflected in the group's share price. Here's what a $10,000 investment made 10 years ago looks like today:
Since September 2008, Domino's Pizza's share price has rocketed, heavily outpacing the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). According to my calculations, the $10,000 worth of shares purchased 10 years ago would now be worth an incredible $130,505 while dividends have contributed almost $9,000 extra — a total of $139,451. That's almost the entire invested amount returned in dividends, alone.
By contrast, $10,000 invested in an index fund following the ASX 200 at the same time would be worth $17,462 today, including dividends, according to data from S&P Dow Jones Indices.
In my opinion, Domino's Pizza is still a very high-quality company but I don't necessarily think it's the greatest buy any more – not at its current price, at least. But there are other lessons to be learned from the chart shown above.
To me, the key takeaway from the chart is the mighty power of the compounding effect. Long-term investors benefit from the gift of time, by letting their shares compound in value over the years rather than selling out for a small gain too early. For example, investors who sold out in 2010 after nearly doubling their money have missed out on enormous gains by not holding on for longer.
Although $139,451 mightn't allow you to retire by the time you're 50, it can certainly be a life-changing amount of cash. Indeed, opportunities like Domino's Pizza are somewhat rare and hard to find, but they are certainly out there (provided you know where to look).
