“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Mastercard Inc (NYSE: MA)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.
| Start date: | 07/15/2011 |
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| End date: | 07/14/2021 | ||||
| Start price/share: | $30.76 | ||||
| End price/share: | $390.80 | ||||
| Starting shares: | 325.10 | ||||
| Ending shares: | 343.39 | ||||
| Dividends reinvested/share: | $8.29 | ||||
| Total return: | 1,241.99% | ||||
| Average annual return: | 29.63% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $134,175.36 | ||||
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 29.63%. This would have turned a $10K investment made 10 years ago into $134,175.36 today (as of 07/14/2021). On a total return basis, that’s a result of 1,241.99% (something to think about: how might MA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Mastercard Inc paid investors a total of $8.29/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 MA has a current yield of approximately 0.45%. 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 $30.76/share purchase price. This works out to a yield on cost of 1.46%.
Here’s one more great investment quote before you go:
“If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.” — Bernard Baruch
