“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Chubb Ltd (NYSE: CB)? Today, we examine the outcome of a decade-long investment into the stock back in 2009.
| Start date: | 04/16/2009 |
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| End date: | 04/15/2019 | ||||
| Start price/share: | $46.41 | ||||
| End price/share: | $138.96 | ||||
| Starting shares: | 215.47 | ||||
| Ending shares: | 271.46 | ||||
| Dividends reinvested/share: | $22.24 | ||||
| Total return: | 277.22% | ||||
| Average annual return: | 14.19% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $37,708.44 | ||||
As shown above, the decade-long investment result worked out quite well, with an annualized rate of return of 14.19%. This would have turned a $10K investment made 10 years ago into $37,708.44 today (as of 04/15/2019). On a total return basis, that’s a result of 277.22% (something to think about: how might CB shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Chubb Ltd paid investors a total of $22.24/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 2.92/share, we calculate that CB has a current yield of approximately 2.10%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.92 against the original $46.41/share purchase price. This works out to a yield on cost of 4.52%.
Here’s one more great investment quote before you go:
“I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.” — Peter Lynch
