“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 Franklin Resources Inc (NYSE: BEN)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.
| Start date: | 01/21/2010 |
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| End date: | 01/17/2020 | ||||
| Start price/share: | $34.91 | ||||
| End price/share: | $25.74 | ||||
| Starting shares: | 286.45 | ||||
| Ending shares: | 378.19 | ||||
| Dividends reinvested/share: | $10.30 | ||||
| Total return: | -2.65% | ||||
| Average annual return: | -0.27% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,733.40 | ||||
As we can see, the decade-long investment result worked out poorly, with an annualized rate of return of -0.27%. This would have turned a $10K investment made 10 years ago into $9,733.40 today (as of 01/17/2020). On a total return basis, that’s a result of -2.65% (something to think about: how might BEN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Franklin Resources Inc paid investors a total of $10.30/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 1.08/share, we calculate that BEN has a current yield of approximately 4.20%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.08 against the original $34.91/share purchase price. This works out to a yield on cost of 12.03%.
One more investment quote to leave you with:
“Twenty years in this business convinces me that any normal person using the customary three percent of the brain can pick stocks just as well, if not better, than the average Wall Street expert.” — Peter Lynch
