“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 ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Johnson Controls International plc (NYSE: JCI)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
| Start date: | 05/19/2010 |
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| End date: | 05/18/2020 | ||||
| Start price/share: | $39.45 | ||||
| End price/share: | $29.53 | ||||
| Starting shares: | 253.49 | ||||
| Ending shares: | 351.43 | ||||
| Dividends reinvested/share: | $13.54 | ||||
| Total return: | 3.78% | ||||
| Average annual return: | 0.37% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,376.43 | ||||
As we can see, the ten year investment result worked out as follows, with an annualized rate of return of 0.37%. This would have turned a $10K investment made 10 years ago into $10,376.43 today (as of 05/18/2020). On a total return basis, that’s a result of 3.78% (something to think about: how might JCI shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Johnson Controls International plc paid investors a total of $13.54/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 1.04/share, we calculate that JCI has a current yield of approximately 3.52%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.04 against the original $39.45/share purchase price. This works out to a yield on cost of 8.92%.
More investment wisdom to ponder:
“When I was young I thought that money was the most important thing in life; now that I am old I know that it is.” — Oscar Wilde
