“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Waste Management, Inc. (NYSE: WM)? Today, we examine the outcome of a decade-long investment into the stock back in 2009.
| Start date: | 12/07/2009 |
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| End date: | 12/05/2019 | ||||
| Start price/share: | $33.79 | ||||
| End price/share: | $111.47 | ||||
| Starting shares: | 295.95 | ||||
| Ending shares: | 401.93 | ||||
| Dividends reinvested/share: | $15.79 | ||||
| Total return: | 348.03% | ||||
| Average annual return: | 16.18% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $44,803.68 | ||||
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 16.18%. This would have turned a $10K investment made 10 years ago into $44,803.68 today (as of 12/05/2019). On a total return basis, that’s a result of 348.03% (something to think about: how might WM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Waste Management, Inc. paid investors a total of $15.79/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 2.05/share, we calculate that WM has a current yield of approximately 1.84%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.05 against the original $33.79/share purchase price. This works out to a yield on cost of 5.45%.
One more piece of investment wisdom to leave you with:
“Most investors want to do today what they should have done yesterday.” — Larry Summers
