“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 Nordstrom, Inc. (NYSE: JWN)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
| Start date: | 05/17/2010 |
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| End date: | 05/14/2020 | ||||
| Start price/share: | $39.25 | ||||
| End price/share: | $15.61 | ||||
| Starting shares: | 254.78 | ||||
| Ending shares: | 355.85 | ||||
| Dividends reinvested/share: | $17.74 | ||||
| Total return: | -44.45% | ||||
| Average annual return: | -5.71% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $5,554.65 | ||||
As we can see, the ten year investment result worked out poorly, with an annualized rate of return of -5.71%. This would have turned a $10K investment made 10 years ago into $5,554.65 today (as of 05/14/2020). On a total return basis, that’s a result of -44.45% (something to think about: how might JWN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Nordstrom, Inc. paid investors a total of $17.74/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 1.48/share, we calculate that JWN has a current yield of approximately 9.48%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.48 against the original $39.25/share purchase price. This works out to a yield on cost of 24.15%.
Here’s one more great investment quote before you go:
“You make most of your money in a bear market, you just don’t realize it at the time.” — Shelby Davis
