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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 Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Prudential Financial Inc (NYSE: PRU)? Today, we examine the outcome of a ten year investment into the stock back in 2009.

Start date: 05/07/2009


End date: 05/06/2019
Start price/share: $42.87
End price/share: $102.03
Starting shares: 233.26
Ending shares: 310.78
Dividends reinvested/share: $21.64
Total return: 217.09%
Average annual return: 12.23%
Starting investment: $10,000.00
Ending investment: $31,712.24

As shown above, the ten year investment result worked out quite well, with an annualized rate of return of 12.23%. This would have turned a $10K investment made 10 years ago into $31,712.24 today (as of 05/06/2019). On a total return basis, that’s a result of 217.09% (something to think about: how might PRU shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Many investors out there refuse to own any stock that lacks a dividend; in the case of Prudential Financial Inc, investors have received $21.64/share in dividends these past 10 years examined in the exercise above. This means total return was driven not just by share price, but also by the dividends received (and what the investor did with those dividends). For this exercise, what we’ve done with the dividends is to assume they are reinvestted — i.e. used to purchase additional shares (the calculations use closing price on ex-date).

Based upon the most recent annualized dividend rate of 4/share, we calculate that PRU has a current yield of approximately 3.92%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4 against the original $42.87/share purchase price. This works out to a yield on cost of 9.14%.

Another great investment quote to think about:
“Thousands of experts study overbought indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply…and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.” — Peter Lynch