“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 Philip Morris International Inc (NYSE: PM)? Today, we examine the outcome of a ten year investment into the stock back in 2009.
| Start date: | 06/24/2009 |
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| End date: | 06/21/2019 | ||||
| Start price/share: | $41.63 | ||||
| End price/share: | $79.22 | ||||
| Starting shares: | 240.21 | ||||
| Ending shares: | 375.70 | ||||
| Dividends reinvested/share: | $36.27 | ||||
| Total return: | 197.63% | ||||
| Average annual return: | 11.53% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $29,770.57 | ||||
As we can see, the ten year investment result worked out quite well, with an annualized rate of return of 11.53%. This would have turned a $10K investment made 10 years ago into $29,770.57 today (as of 06/21/2019). On a total return basis, that’s a result of 197.63% (something to think about: how might PM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Philip Morris International Inc paid investors a total of $36.27/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 4.56/share, we calculate that PM has a current yield of approximately 5.76%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.56 against the original $41.63/share purchase price. This works out to a yield on cost of 13.84%.
Another great investment quote to think about:
“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.” — William Feather
