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“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 Packaging Corp of America (NYSE: PKG)? 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: $22.04
End price/share: $104.40
Starting shares: 453.72
Ending shares: 603.15
Dividends reinvested/share: $18.75
Total return: 529.69%
Average annual return: 20.20%
Starting investment: $10,000.00
Ending investment: $62,988.84

As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 20.20%. This would have turned a $10K investment made 10 years ago into $62,988.84 today (as of 01/28/2020). On a total return basis, that’s a result of 529.69% (something to think about: how might PKG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Packaging Corp of America paid investors a total of $18.75/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 3.16/share, we calculate that PKG has a current yield of approximately 3.03%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.16 against the original $22.04/share purchase price. This works out to a yield on cost of 13.75%.

One more investment quote to leave you with:
“Anyone who is not investing now is missing a tremendous opportunity.” — Carlos Slim