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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a ten year holding period for an investor who was considering Willis Towers Watson Public Ltd Co (NASD: WLTW) back in 2009, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 03/06/2009
$10,000

03/06/2009
$16,762

03/05/2019
End date: 03/05/2019
Start price/share: $127.97
End price/share: $182.04
Starting shares: 78.14
Ending shares: 92.11
Dividends reinvested/share: $41.00
Total return: 67.68%
Average annual return: 5.30%
Starting investment: $10,000.00
Ending investment: $16,762.75

As we can see, the ten year investment result worked out well, with an annualized rate of return of 5.30%. This would have turned a $10K investment made 10 years ago into $16,762.75 today (as of 03/05/2019). On a total return basis, that’s a result of 67.68% (something to think about: how might WLTW shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Willis Towers Watson Public Ltd Co paid investors a total of $41.00/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 2.4/share, we calculate that WLTW has a current yield of approximately 1.32%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.4 against the original $127.97/share purchase price. This works out to a yield on cost of 1.03%.

Another great investment quote to think about:
“Price is what you pay. Value is what you get.” — Warren Buffett