“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 Parker Hannifin Corp (NYSE: PH)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.
| Start date: | 01/29/2010 |
|
|||
| End date: | 01/28/2020 | ||||
| Start price/share: | $55.91 | ||||
| End price/share: | $196.80 | ||||
| Starting shares: | 178.86 | ||||
| Ending shares: | 215.30 | ||||
| Dividends reinvested/share: | $21.99 | ||||
| Total return: | 323.70% | ||||
| Average annual return: | 15.53% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $42,375.96 | ||||
As shown above, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 15.53%. This would have turned a $10K investment made 10 years ago into $42,375.96 today (as of 01/28/2020). On a total return basis, that’s a result of 323.70% (something to think about: how might PH shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Parker Hannifin Corp paid investors a total of $21.99/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 3.52/share, we calculate that PH has a current yield of approximately 1.79%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.52 against the original $55.91/share purchase price. This works out to a yield on cost of 3.20%.
Here’s one more great investment quote before you go:
“Price is what you pay. Value is what you get.” — Warren Buffett
