“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 ten year 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 Fidelity National Information Services Inc (NYSE: FIS), by taking a look at the investment outcome over a ten year holding period.
| Start date: | 06/08/2009 |
|
|||
| End date: | 06/06/2019 | ||||
| Start price/share: | $20.14 | ||||
| End price/share: | $121.57 | ||||
| Starting shares: | 496.52 | ||||
| Ending shares: | 572.03 | ||||
| Dividends reinvested/share: | $8.06 | ||||
| Total return: | 595.41% | ||||
| Average annual return: | 21.40% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $69,532.34 | ||||
As we can see, the ten year investment result worked out exceptionally well, with an annualized rate of return of 21.40%. This would have turned a $10K investment made 10 years ago into $69,532.34 today (as of 06/06/2019). On a total return basis, that’s a result of 595.41% (something to think about: how might FIS shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Fidelity National Information Services Inc paid investors a total of $8.06/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 1.4/share, we calculate that FIS has a current yield of approximately 1.15%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.4 against the original $20.14/share purchase price. This works out to a yield on cost of 5.71%.
One more investment quote to leave you with:
“A 10% decline in the market is fairly common, it happens about once a year. Investors who realize this are less likely to sell in a panic, and more likely to remain invested, benefitting from the wealthbuilding power of stocks.” — Christopher Davis
FIS
