“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 Marriott International, Inc. (NASD: MAR), by taking a look at the investment outcome over a decade-long holding period.
| Start date: | 04/06/2011 |
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| End date: | 04/05/2021 | ||||
| Start price/share: | $33.47 | ||||
| End price/share: | $150.93 | ||||
| Starting shares: | 298.78 | ||||
| Ending shares: | 337.71 | ||||
| Dividends reinvested/share: | $9.47 | ||||
| Total return: | 409.70% | ||||
| Average annual return: | 17.68% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $50,981.66 | ||||
As shown above, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 17.68%. This would have turned a $10K investment made 10 years ago into $50,981.66 today (as of 04/05/2021). On a total return basis, that’s a result of 409.70% (something to think about: how might MAR shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Marriott International, Inc. paid investors a total of $9.47/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 1.92/share, we calculate that MAR 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 1.92 against the original $33.47/share purchase price. This works out to a yield on cost of 0.00%.
Another great investment quote to think about:
“The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.” — Benjamin Graham
