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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 JPMorgan Chase & Co (NYSE: JPM), by taking a look at the investment outcome over a ten year holding period.

Start date: 11/20/2009
$10,000

11/20/2009
$39,118

11/19/2019
End date: 11/19/2019
Start price/share: $42.46
End price/share: $130.58
Starting shares: 235.52
Ending shares: 299.57
Dividends reinvested/share: $16.41
Total return: 291.17%
Average annual return: 14.61%
Starting investment: $10,000.00
Ending investment: $39,118.97

The above analysis shows the ten year investment result worked out quite well, with an annualized rate of return of 14.61%. This would have turned a $10K investment made 10 years ago into $39,118.97 today (as of 11/19/2019). On a total return basis, that’s a result of 291.17% (something to think about: how might JPM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that JPMorgan Chase & Co paid investors a total of $16.41/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 JPM has a current yield of approximately 2.76%. 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 $42.46/share purchase price. This works out to a yield on cost of 6.50%.

More investment wisdom to ponder:
“All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.” — Peter Lynch