“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a decade-long period?
Today, let’s look backwards in time to 2011, and take a look at what happened to investors who asked that very question about Walt Disney Co. (NYSE: DIS), by taking a look at the investment outcome over a decade-long holding period.
| Start date: | 03/16/2011 |
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| End date: | 03/15/2021 | ||||
| Start price/share: | $40.60 | ||||
| End price/share: | $196.76 | ||||
| Starting shares: | 246.31 | ||||
| Ending shares: | 279.70 | ||||
| Dividends reinvested/share: | $11.32 | ||||
| Total return: | 450.34% | ||||
| Average annual return: | 18.58% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $55,019.93 | ||||
The above analysis shows the decade-long investment result worked out exceptionally well, with an annualized rate of return of 18.58%. This would have turned a $10K investment made 10 years ago into $55,019.93 today (as of 03/15/2021). On a total return basis, that’s a result of 450.34% (something to think about: how might DIS shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Walt Disney Co. paid investors a total of $11.32/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 1.76/share, we calculate that DIS has a current yield of approximately 0.00%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.76 against the original $40.60/share purchase price. This works out to a yield on cost of 0.00%.
Another great investment quote to think about:
“To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.” — Benjamin Graham
