“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 US Bancorp (NYSE: USB)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.
| Start date: | 03/24/2010 |
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| End date: | 03/23/2020 | ||||
| Start price/share: | $26.19 | ||||
| End price/share: | $28.93 | ||||
| Starting shares: | 381.83 | ||||
| Ending shares: | 478.19 | ||||
| Dividends reinvested/share: | $9.49 | ||||
| Total return: | 38.34% | ||||
| Average annual return: | 3.30% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $13,838.23 | ||||
As shown above, the decade-long investment result worked out as follows, with an annualized rate of return of 3.30%. This would have turned a $10K investment made 10 years ago into $13,838.23 today (as of 03/23/2020). On a total return basis, that’s a result of 38.34% (something to think about: how might USB shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that US Bancorp paid investors a total of $9.49/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 1.68/share, we calculate that USB has a current yield of approximately 5.81%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.68 against the original $26.19/share purchase price. This works out to a yield on cost of 22.18%.
Another great investment quote to think about:
“The emotional burden of trading is substantial; on any given day, I could lose millions of dollars. If you personalize these losses, you can’t trade.” — Bruce Kovner
