“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 MGM Resorts International (NYSE: MGM)? Today, we examine the outcome of a ten year investment into the stock back in 2009.
| Start date: | 07/30/2009 |
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| End date: | 07/29/2019 | ||||
| Start price/share: | $7.40 | ||||
| End price/share: | $30.47 | ||||
| Starting shares: | 1,351.35 | ||||
| Ending shares: | 1,406.94 | ||||
| Dividends reinvested/share: | $1.18 | ||||
| Total return: | 328.70% | ||||
| Average annual return: | 15.66% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $42,855.34 | ||||
As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 15.66%. This would have turned a $10K investment made 10 years ago into $42,855.34 today (as of 07/29/2019). On a total return basis, that’s a result of 328.70% (something to think about: how might MGM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that MGM Resorts International paid investors a total of $1.18/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 .52/share, we calculate that MGM has a current yield of approximately 1.71%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .52 against the original $7.40/share purchase price. This works out to a yield on cost of 23.11%.
More investment wisdom to ponder:
“Most investors want to do today what they should have done yesterday.” — Larry Summers
