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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 decade-long holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Sealed Air Corp (NYSE: SEE) back in 2009: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full decade-long investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.

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

10/07/2009
$24,980

10/04/2019
End date: 10/04/2019
Start price/share: $19.38
End price/share: $40.25
Starting shares: 516.00
Ending shares: 620.43
Dividends reinvested/share: $5.59
Total return: 149.72%
Average annual return: 9.59%
Starting investment: $10,000.00
Ending investment: $24,980.45

As we can see, the decade-long investment result worked out well, with an annualized rate of return of 9.59%. This would have turned a $10K investment made 10 years ago into $24,980.45 today (as of 10/04/2019). On a total return basis, that’s a result of 149.72% (something to think about: how might SEE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Sealed Air Corp paid investors a total of $5.59/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 .64/share, we calculate that SEE has a current yield of approximately 1.59%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .64 against the original $19.38/share purchase price. This works out to a yield on cost of 8.20%.

Another great investment quote to think about:
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” — Peter Lynch