“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.
|Average annual return:||29.63%|
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