“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 Analog Devices Inc (NASD: ADI)? Today, we examine the outcome of a ten year investment into the stock back in 2009.
| Start date: | 11/09/2009 |
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| End date: | 11/07/2019 | ||||
| Start price/share: | $27.13 | ||||
| End price/share: | $112.29 | ||||
| Starting shares: | 368.60 | ||||
| Ending shares: | 478.46 | ||||
| Dividends reinvested/share: | $14.69 | ||||
| Total return: | 437.26% | ||||
| Average annual return: | 18.31% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $53,729.72 | ||||
As we can see, the ten year investment result worked out exceptionally well, with an annualized rate of return of 18.31%. This would have turned a $10K investment made 10 years ago into $53,729.72 today (as of 11/07/2019). On a total return basis, that’s a result of 437.26% (something to think about: how might ADI shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Analog Devices Inc paid investors a total of $14.69/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 2.16/share, we calculate that ADI has a current yield of approximately 1.92%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.16 against the original $27.13/share purchase price. This works out to a yield on cost of 7.08%.
One more piece of investment wisdom to leave you with:
“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” — Peter Lynch
