“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 American International Group Inc (NYSE: AIG)? Today, we examine the outcome of a ten year investment into the stock back in 2009.
| Start date: | 12/07/2009 |
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| End date: | 12/04/2019 | ||||
| Start price/share: | $30.17 | ||||
| End price/share: | $51.11 | ||||
| Starting shares: | 331.46 | ||||
| Ending shares: | 446.92 | ||||
| Dividends reinvested/share: | $15.01 | ||||
| Total return: | 128.42% | ||||
| Average annual return: | 8.61% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,834.94 | ||||
As shown above, the ten year investment result worked out well, with an annualized rate of return of 8.61%. This would have turned a $10K investment made 10 years ago into $22,834.94 today (as of 12/04/2019). On a total return basis, that’s a result of 128.42% (something to think about: how might AIG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that American International Group Inc paid investors a total of $15.01/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 1.28/share, we calculate that AIG has a current yield of approximately 2.50%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.28 against the original $30.17/share purchase price. This works out to a yield on cost of 8.29%.
Here’s one more great investment quote before you go:
“In the end, how your investments behave is much less important than how you behave.” — Benjamin Graham
