“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 Invesco Ltd (NYSE: IVZ)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.
| Start date: | 02/11/2011 |
|
|||
| End date: | 02/10/2021 | ||||
| Start price/share: | $25.75 | ||||
| End price/share: | $22.72 | ||||
| Starting shares: | 388.35 | ||||
| Ending shares: | 567.23 | ||||
| Dividends reinvested/share: | $9.46 | ||||
| Total return: | 28.87% | ||||
| Average annual return: | 2.57% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,890.33 | ||||
As shown above, the decade-long investment result worked out as follows, with an annualized rate of return of 2.57%. This would have turned a $10K investment made 10 years ago into $12,890.33 today (as of 02/10/2021). On a total return basis, that’s a result of 28.87% (something to think about: how might IVZ shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Invesco Ltd paid investors a total of $9.46/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 .62/share, we calculate that IVZ has a current yield of approximately 2.73%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .62 against the original $25.75/share purchase price. This works out to a yield on cost of 10.60%.
More investment wisdom to ponder:
“All intelligent investing is value investing: acquiring more that you are paying for. You must value the business in order to value the stock.” — Charlie Munger
