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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 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 Prudential Financial Inc (NYSE: PRU)? Today, we examine the outcome of a ten year investment into the stock back in 2010.

Start date: 06/03/2010


End date: 06/02/2020
Start price/share: $59.31
End price/share: $60.96
Starting shares: 168.61
Ending shares: 235.97
Dividends reinvested/share: $26.14
Total return: 43.85%
Average annual return: 3.70%
Starting investment: $10,000.00
Ending investment: $14,383.81

As shown above, the ten year investment result worked out as follows, with an annualized rate of return of 3.70%. This would have turned a $10K investment made 10 years ago into $14,383.81 today (as of 06/02/2020). On a total return basis, that’s a result of 43.85% (something to think about: how might PRU shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Prudential Financial Inc paid investors a total of $26.14/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 4.4/share, we calculate that PRU has a current yield of approximately 7.22%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.4 against the original $59.31/share purchase price. This works out to a yield on cost of 12.17%.

More investment wisdom to ponder:
“Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon. Few are willing and able to devote sufficient time and effort to become value investors, and only a fraction of those have the proper mind-set to succeed.” — Seth Klarman