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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 Texas Instruments Inc. (NASD: TXN) back in 2009, bought the stock, ignored the market’s ups and downs, and simply held through to today.

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

10/29/2009
$63,673

10/28/2019
End date: 10/28/2019
Start price/share: $23.92
End price/share: $120.00
Starting shares: 418.06
Ending shares: 530.67
Dividends reinvested/share: $14.18
Total return: 536.80%
Average annual return: 20.33%
Starting investment: $10,000.00
Ending investment: $63,673.59

The above analysis shows the decade-long investment result worked out exceptionally well, with an annualized rate of return of 20.33%. This would have turned a $10K investment made 10 years ago into $63,673.59 today (as of 10/28/2019). On a total return basis, that’s a result of 536.80% (something to think about: how might TXN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Texas Instruments Inc. paid investors a total of $14.18/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 3.6/share, we calculate that TXN has a current yield of approximately 3.00%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.6 against the original $23.92/share purchase price. This works out to a yield on cost of 12.54%.

Another great investment quote to think about:
“There is nothing riskier than the widespread perception that there is no risk.” — Howard Marks