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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

The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a decade-long period?

Today, let’s look backwards in time to 2009, and take a look at what happened to investors who asked that very question about Lam Research Corp (NASD: LRCX), by taking a look at the investment outcome over a decade-long holding period.

Start date: 04/22/2009
$10,000

04/22/2009
$81,516

04/18/2019
End date: 04/18/2019
Start price/share: $25.80
End price/share: $194.77
Starting shares: 387.60
Ending shares: 418.59
Dividends reinvested/share: $9.72
Total return: 715.29%
Average annual return: 23.36%
Starting investment: $10,000.00
Ending investment: $81,516.22

As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 23.36%. This would have turned a $10K investment made 10 years ago into $81,516.22 today (as of 04/18/2019). On a total return basis, that’s a result of 715.29% (something to think about: how might LRCX shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Lam Research Corp paid investors a total of $9.72/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 4.4/share, we calculate that LRCX has a current yield of approximately 2.26%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.4 against the original $25.80/share purchase price. This works out to a yield on cost of 8.76%.

One more investment quote to leave you with:
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher