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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

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a decade-long holding period for an investor who was considering Leggett & Platt, Inc. (NYSE: LEG) back in 2009, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 07/06/2009
$10,000

07/06/2009
$39,485

07/02/2019
End date: 07/02/2019
Start price/share: $14.45
End price/share: $38.90
Starting shares: 692.04
Ending shares: 1,015.50
Dividends reinvested/share: $12.52
Total return: 295.03%
Average annual return: 14.73%
Starting investment: $10,000.00
Ending investment: $39,485.98

As shown above, the decade-long investment result worked out quite well, with an annualized rate of return of 14.73%. This would have turned a $10K investment made 10 years ago into $39,485.98 today (as of 07/02/2019). On a total return basis, that’s a result of 295.03% (something to think about: how might LEG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Leggett & Platt, Inc. paid investors a total of $12.52/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 1.6/share, we calculate that LEG has a current yield of approximately 4.11%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.6 against the original $14.45/share purchase price. This works out to a yield on cost of 28.44%.

Another great investment quote to think about:
“All the opportunity in the world means nothing if you don’t actually pull the trigger.” — Sam Zell