“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 Flowserve Corp (NYSE: FLS)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.
| Start date: | 07/09/2010 |
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| End date: | 07/08/2020 | ||||
| Start price/share: | $30.90 | ||||
| End price/share: | $27.57 | ||||
| Starting shares: | 323.62 | ||||
| Ending shares: | 374.33 | ||||
| Dividends reinvested/share: | $6.46 | ||||
| Total return: | 3.20% | ||||
| Average annual return: | 0.32% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,324.83 | ||||
The above analysis shows the decade-long investment result worked out as follows, with an annualized rate of return of 0.32%. This would have turned a $10K investment made 10 years ago into $10,324.83 today (as of 07/08/2020). On a total return basis, that’s a result of 3.20% (something to think about: how might FLS shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Flowserve Corp paid investors a total of $6.46/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 .8/share, we calculate that FLS has a current yield of approximately 2.90%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .8 against the original $30.90/share purchase price. This works out to a yield on cost of 9.39%.
Another great investment quote to think about:
“A 10% decline in the market is fairly common, it happens about once a year. Investors who realize this are less likely to sell in a panic, and more likely to remain invested, benefitting from the wealthbuilding power of stocks.” — Christopher Davis
