“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 Jefferies Group Inc. (NYSE: JEF)? Today, we examine the outcome of a decade-long investment into the stock back in 2009.
| Start date: | 05/04/2009 |
|
|||
| End date: | 05/01/2019 | ||||
| Start price/share: | $24.13 | ||||
| End price/share: | $20.47 | ||||
| Starting shares: | 414.42 | ||||
| Ending shares: | 464.65 | ||||
| Dividends reinvested/share: | $2.66 | ||||
| Total return: | -4.89% | ||||
| Average annual return: | -0.50% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,511.23 | ||||
As shown above, the decade-long investment result worked out poorly, with an annualized rate of return of -0.50%. This would have turned a $10K investment made 10 years ago into $9,511.23 today (as of 05/01/2019). On a total return basis, that’s a result of -4.89% (something to think about: how might JEF shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Jefferies Group Inc. paid investors a total of $2.66/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 .5/share, we calculate that JEF has a current yield of approximately 2.44%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .5 against the original $24.13/share purchase price. This works out to a yield on cost of 10.11%.
Here’s one more great investment quote before you go:
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” — George Soros
