“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 Macy’s Inc (NYSE: M)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.
| Start date: | 01/11/2010 |
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| End date: | 01/09/2020 | ||||
| Start price/share: | $16.62 | ||||
| End price/share: | $17.71 | ||||
| Starting shares: | 601.68 | ||||
| Ending shares: | 841.21 | ||||
| Dividends reinvested/share: | $10.91 | ||||
| Total return: | 48.98% | ||||
| Average annual return: | 4.07% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,902.38 | ||||
As we can see, the decade-long investment result worked out as follows, with an annualized rate of return of 4.07%. This would have turned a $10K investment made 10 years ago into $14,902.38 today (as of 01/09/2020). On a total return basis, that’s a result of 48.98% (something to think about: how might M shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Macy’s Inc paid investors a total of $10.91/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 1.51/share, we calculate that M has a current yield of approximately 8.53%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.51 against the original $16.62/share purchase price. This works out to a yield on cost of 51.32%.
Here’s one more great investment quote before you go:
“The investor’s chief problem, even his worst enemy, is likely to be himself.” — Benjamin Graham
