“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 Mastercard Inc (NYSE: MA)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.
| Start date: | 12/07/2010 |
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| End date: | 12/04/2020 | ||||
| Start price/share: | $24.68 | ||||
| End price/share: | $344.35 | ||||
| Starting shares: | 405.19 | ||||
| Ending shares: | 427.17 | ||||
| Dividends reinvested/share: | $7.02 | ||||
| Total return: | 1,370.97% | ||||
| Average annual return: | 30.85% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $147,142.21 | ||||
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 30.85%. This would have turned a $10K investment made 10 years ago into $147,142.21 today (as of 12/04/2020). On a total return basis, that’s a result of 1,370.97% (something to think about: how might MA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Mastercard Inc paid investors a total of $7.02/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 1.6/share, we calculate that MA has a current yield of approximately 0.46%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.6 against the original $24.68/share purchase price. This works out to a yield on cost of 1.86%.
Another great investment quote to think about:
“When everyone is going right, look left.” — Sam Zell
