“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 Verisign Inc (NASD: VRSN) back in 2009, bought the stock, ignored the market’s ups and downs, and simply held through to today.
|Average annual return:||25.51%|
As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 25.51%. This would have turned a $10K investment made 10 years ago into $96,942.22 today (as of 05/15/2019). On a total return basis, that’s a result of 869.25% (something to think about: how might VRSN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Verisign Inc paid investors a total of $5.75/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 /share, we calculate that VRSN has a current yield of approximately 0.00%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of against the original $23.49/share purchase price. This works out to a yield on cost of 0.00%.
More investment wisdom to ponder:
“Know what you own and why you own it.” — Peter Lynch