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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 Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Morgan Stanley (NYSE: MS)? Today, we examine the outcome of a ten year investment into the stock back in 2011.

Start date: 04/25/2011


End date: 04/21/2021
Start price/share: $25.78
End price/share: $79.25
Starting shares: 387.90
Ending shares: 465.04
Dividends reinvested/share: $7.20
Total return: 268.54%
Average annual return: 13.94%
Starting investment: $10,000.00
Ending investment: $36,864.37

As shown above, the ten year investment result worked out quite well, with an annualized rate of return of 13.94%. This would have turned a $10K investment made 10 years ago into $36,864.37 today (as of 04/21/2021). On a total return basis, that’s a result of 268.54% (something to think about: how might MS shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Morgan Stanley paid investors a total of $7.20/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 1.4/share, we calculate that MS has a current yield of approximately 1.77%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.4 against the original $25.78/share purchase price. This works out to a yield on cost of 6.87%.

Here’s one more great investment quote before you go:
“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” — Warren Buffett