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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 Wells Fargo & Co (NYSE: WFC)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.

Start date: 04/01/2010
$10,000

04/01/2010
$11,989

03/31/2020
End date: 03/31/2020
Start price/share: $31.37
End price/share: $28.70
Starting shares: 318.78
Ending shares: 417.58
Dividends reinvested/share: $12.61
Total return: 19.85%
Average annual return: 1.83%
Starting investment: $10,000.00
Ending investment: $11,989.49

As we can see, the decade-long investment result worked out as follows, with an annualized rate of return of 1.83%. This would have turned a $10K investment made 10 years ago into $11,989.49 today (as of 03/31/2020). On a total return basis, that’s a result of 19.85% (something to think about: how might WFC shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Wells Fargo & Co paid investors a total of $12.61/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 2.04/share, we calculate that WFC has a current yield of approximately 7.11%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.04 against the original $31.37/share purchase price. This works out to a yield on cost of 22.66%.

One more investment quote to leave you with:
“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.” — William Feather