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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

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a ten year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Expedia Group Inc (NASD: EXPE) back in 2009: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full ten year investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.

Start date: 07/29/2009
$10,000

07/29/2009
$64,781

07/26/2019
End date: 07/26/2019
Start price/share: $36.68
End price/share: $139.42
Starting shares: 272.63
Ending shares: 464.83
Dividends reinvested/share: $23.30
Total return: 548.07%
Average annual return: 20.55%
Starting investment: $10,000.00
Ending investment: $64,781.32

The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 20.55%. This would have turned a $10K investment made 10 years ago into $64,781.32 today (as of 07/26/2019). On a total return basis, that’s a result of 548.07% (something to think about: how might EXPE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Expedia Group Inc paid investors a total of $23.30/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 1.36/share, we calculate that EXPE has a current yield of approximately 0.98%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.36 against the original $36.68/share purchase price. This works out to a yield on cost of 2.67%.

Here’s one more great investment quote before you go:
“You’ve got to be careful if you don’t know where you’re going, ’cause you might not get there.” — Yogi Berra