“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 Wells Fargo & Co (NYSE: WFC)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
| Start date: | 06/17/2010 |
|
|||
| End date: | 06/16/2020 | ||||
| Start price/share: | $27.93 | ||||
| End price/share: | $28.52 | ||||
| Starting shares: | 358.04 | ||||
| Ending shares: | 477.76 | ||||
| Dividends reinvested/share: | $13.07 | ||||
| Total return: | 36.26% | ||||
| Average annual return: | 3.14% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $13,625.26 | ||||
As shown above, the ten year investment result worked out as follows, with an annualized rate of return of 3.14%. This would have turned a $10K investment made 10 years ago into $13,625.26 today (as of 06/16/2020). On a total return basis, that’s a result of 36.26% (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 $13.07/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 7.15%. 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 $27.93/share purchase price. This works out to a yield on cost of 25.60%.
One more investment quote to leave you with:
“In the end, how your investments behave is much less important than how you behave.” — Benjamin Graham
