“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 American Airlines Group Inc (NASD: AAL)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
|Average annual return:||4.78%|
The above analysis shows the ten year investment result worked out as follows, with an annualized rate of return of 4.78%. This would have turned a $10K investment made 10 years ago into $15,950.85 today (as of 08/28/2020). On a total return basis, that’s a result of 59.49% (something to think about: how might AAL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that American Airlines Group Inc paid investors a total of $2.30/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/share, we calculate that AAL has a current yield of approximately 2.94%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .4 against the original $9.04/share purchase price. This works out to a yield on cost of 32.52%.
One more investment quote to leave you with:
“Although it’s easy to forget sometimes, a share is not a lottery ticketâ€¦ it’s part-ownership of a business.” — Peter Lynch