“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 Franklin Resources Inc (NYSE: BEN)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.
| Start date: | 06/03/2010 |
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| End date: | 06/02/2020 | ||||
| Start price/share: | $31.96 | ||||
| End price/share: | $19.80 | ||||
| Starting shares: | 312.89 | ||||
| Ending shares: | 418.55 | ||||
| Dividends reinvested/share: | $10.50 | ||||
| Total return: | -17.13% | ||||
| Average annual return: | -1.86% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $8,287.35 | ||||
The above analysis shows the decade-long investment result worked out poorly, with an annualized rate of return of -1.86%. This would have turned a $10K investment made 10 years ago into $8,287.35 today (as of 06/02/2020). On a total return basis, that’s a result of -17.13% (something to think about: how might BEN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Franklin Resources Inc paid investors a total of $10.50/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 1.08/share, we calculate that BEN has a current yield of approximately 5.45%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.08 against the original $31.96/share purchase price. This works out to a yield on cost of 17.05%.
One more investment quote to leave you with:
“Investors should purchase stocks like they purchase groceries, not like they purchase perfume.” — Benjamin Graham
