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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

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a ten year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Hasbro, Inc. (NASD: HAS) back in 2011: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full ten year investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.

Start date: 01/26/2011
$10,000

01/26/2011
$28,590

01/25/2021
End date: 01/25/2021
Start price/share: $44.85
End price/share: $95.83
Starting shares: 222.97
Ending shares: 298.38
Dividends reinvested/share: $19.65
Total return: 185.94%
Average annual return: 11.07%
Starting investment: $10,000.00
Ending investment: $28,590.22

The above analysis shows the ten year investment result worked out quite well, with an annualized rate of return of 11.07%. This would have turned a $10K investment made 10 years ago into $28,590.22 today (as of 01/25/2021). On a total return basis, that’s a result of 185.94% (something to think about: how might HAS shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Hasbro, Inc. paid investors a total of $19.65/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 2.72/share, we calculate that HAS has a current yield of approximately 2.84%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.72 against the original $44.85/share purchase price. This works out to a yield on cost of 6.33%.

Here’s one more great investment quote before you go:
“Games are won by players who focus on the playing field, not by those whose eyes are glued to the scoreboard.” — Warren Buffett