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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

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 ten year 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 AmerisourceBergen Corp. (NYSE: ABC), by taking a look at the investment outcome over a ten year holding period.

Start date: 03/17/2011


End date: 03/16/2021
Start price/share: $36.62
End price/share: $112.86
Starting shares: 273.07
Ending shares: 319.62
Dividends reinvested/share: $12.17
Total return: 260.72%
Average annual return: 13.68%
Starting investment: $10,000.00
Ending investment: $36,069.97

The above analysis shows the ten year investment result worked out quite well, with an annualized rate of return of 13.68%. This would have turned a $10K investment made 10 years ago into $36,069.97 today (as of 03/16/2021). On a total return basis, that’s a result of 260.72% (something to think about: how might ABC shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that AmerisourceBergen Corp. paid investors a total of $12.17/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 ABC has a current yield of approximately 1.56%. 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 $36.62/share purchase price. This works out to a yield on cost of 4.26%.

More investment wisdom to ponder:
“Searching for companies is like looking for grubs under rocks: if you turn over 10 rocks you’ll likely find one grub; if you turn over 20 rocks you’ll find two.” — Peter Lynch