“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 Goldman Sachs Group Inc (the (NYSE: GS)? Today, we examine the outcome of a ten year investment into the stock back in 2009.
| Start date: | 12/07/2009 |
|
|||
| End date: | 12/05/2019 | ||||
| Start price/share: | $163.85 | ||||
| End price/share: | $217.14 | ||||
| Starting shares: | 61.03 | ||||
| Ending shares: | 70.09 | ||||
| Dividends reinvested/share: | $24.22 | ||||
| Total return: | 52.18% | ||||
| Average annual return: | 4.29% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,220.42 | ||||
As we can see, the ten year investment result worked out as follows, with an annualized rate of return of 4.29%. This would have turned a $10K investment made 10 years ago into $15,220.42 today (as of 12/05/2019). On a total return basis, that’s a result of 52.18% (something to think about: how might GS shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Goldman Sachs Group Inc (the paid investors a total of $24.22/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 5/share, we calculate that GS has a current yield of approximately 2.30%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5 against the original $163.85/share purchase price. This works out to a yield on cost of 1.40%.
Here’s one more great investment quote before you go:
“The most important three words in investing is: “I don’t know.†If someone doesn’t say that to you then they are lying.” — James Altucher
