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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

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 Altria Group Inc (NYSE: MO), by taking a look at the investment outcome over a ten year holding period.

Start date: 09/23/2009
$10,000

09/23/2009
$38,178

09/20/2019
End date: 09/20/2019
Start price/share: $17.75
End price/share: $40.81
Starting shares: 563.38
Ending shares: 935.60
Dividends reinvested/share: $21.42
Total return: 281.82%
Average annual return: 14.34%
Starting investment: $10,000.00
Ending investment: $38,178.81

The above analysis shows the ten year investment result worked out quite well, with an annualized rate of return of 14.34%. This would have turned a $10K investment made 10 years ago into $38,178.81 today (as of 09/20/2019). On a total return basis, that’s a result of 281.82% (something to think about: how might MO shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Altria Group Inc paid investors a total of $21.42/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 3.36/share, we calculate that MO has a current yield of approximately 8.23%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.36 against the original $17.75/share purchase price. This works out to a yield on cost of 46.37%.

Here’s one more great investment quote before you go:
“The policy of being too cautious is the greatest risk of all.” — Jawaharlal Nehru