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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

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a decade-long holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Assurant Inc (NYSE: AIZ) back in 2010: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full decade-long investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.

Start date: 02/08/2010


End date: 02/04/2020
Start price/share: $30.16
End price/share: $134.32
Starting shares: 331.56
Ending shares: 407.08
Dividends reinvested/share: $14.42
Total return: 446.79%
Average annual return: 18.53%
Starting investment: $10,000.00
Ending investment: $54,686.27

As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 18.53%. This would have turned a $10K investment made 10 years ago into $54,686.27 today (as of 02/04/2020). On a total return basis, that’s a result of 446.79% (something to think about: how might AIZ shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Assurant Inc paid investors a total of $14.42/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 2.52/share, we calculate that AIZ has a current yield of approximately 1.84%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.52 against the original $30.16/share purchase price. This works out to a yield on cost of 6.10%.

Another great investment quote to think about:
“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