“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a ten year period?
Today, let’s look backwards in time to 2010, and take a look at what happened to investors who asked that very question about Marriott International, Inc. (NASD: MAR), by taking a look at the investment outcome over a ten year holding period.
| Start date: | 02/25/2010 |
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| End date: | 02/24/2020 | ||||
| Start price/share: | $25.45 | ||||
| End price/share: | $134.83 | ||||
| Starting shares: | 392.93 | ||||
| Ending shares: | 445.45 | ||||
| Dividends reinvested/share: | $9.23 | ||||
| Total return: | 500.60% | ||||
| Average annual return: | 19.63% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $60,064.01 | ||||
The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 19.63%. This would have turned a $10K investment made 10 years ago into $60,064.01 today (as of 02/24/2020). On a total return basis, that’s a result of 500.60% (something to think about: how might MAR shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Marriott International, Inc. paid investors a total of $9.23/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 1.92/share, we calculate that MAR has a current yield of approximately 1.42%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.92 against the original $25.45/share purchase price. This works out to a yield on cost of 5.58%.
One more investment quote to leave you with:
“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” — Charlie Munger
