“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a decade-long holding period for an investor who was considering Deere & Co. (NYSE: DE) back in 2011, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 03/31/2011 |
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| End date: | 03/30/2021 | ||||
| Start price/share: | $96.89 | ||||
| End price/share: | $373.92 | ||||
| Starting shares: | 103.21 | ||||
| Ending shares: | 128.66 | ||||
| Dividends reinvested/share: | $24.34 | ||||
| Total return: | 381.09% | ||||
| Average annual return: | 17.00% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $48,109.65 | ||||
The above analysis shows the decade-long investment result worked out exceptionally well, with an annualized rate of return of 17.00%. This would have turned a $10K investment made 10 years ago into $48,109.65 today (as of 03/30/2021). On a total return basis, that’s a result of 381.09% (something to think about: how might DE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Deere & Co. paid investors a total of $24.34/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 3.6/share, we calculate that DE has a current yield of approximately 0.96%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.6 against the original $96.89/share purchase price. This works out to a yield on cost of 0.99%.
One more investment quote to leave you with:
“I make no attempt to forecast the market; my efforts are devoted to finding undervalued securities.” — Warren Buffett
