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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

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a decade-long holding period for an investor who was considering Intercontinental Exchange Inc (NYSE: ICE) back in 2010, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 07/08/2010
$10,000

07/08/2010
$47,010

07/07/2020
End date: 07/07/2020
Start price/share: $21.46
End price/share: $92.57
Starting shares: 465.98
Ending shares: 507.80
Dividends reinvested/share: $5.37
Total return: 370.07%
Average annual return: 16.73%
Starting investment: $10,000.00
Ending investment: $47,010.30

As shown above, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 16.73%. This would have turned a $10K investment made 10 years ago into $47,010.30 today (as of 07/07/2020). On a total return basis, that’s a result of 370.07% (something to think about: how might ICE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Intercontinental Exchange Inc paid investors a total of $5.37/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 1.2/share, we calculate that ICE has a current yield of approximately 1.30%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.2 against the original $21.46/share purchase price. This works out to a yield on cost of 6.06%.

One more piece of investment wisdom to leave you with:
“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” — Peter Lynch