“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 3M Co (NYSE: MMM)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.
| Start date: | 07/28/2011 |
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| End date: | 07/27/2021 | ||||
| Start price/share: | $87.57 | ||||
| End price/share: | $200.47 | ||||
| Starting shares: | 114.19 | ||||
| Ending shares: | 150.24 | ||||
| Dividends reinvested/share: | $42.70 | ||||
| Total return: | 201.18% | ||||
| Average annual return: | 11.65% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $30,119.62 | ||||
As shown above, the decade-long investment result worked out quite well, with an annualized rate of return of 11.65%. This would have turned a $10K investment made 10 years ago into $30,119.62 today (as of 07/27/2021). On a total return basis, that’s a result of 201.18% (something to think about: how might MMM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that 3M Co paid investors a total of $42.70/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 5.92/share, we calculate that MMM has a current yield of approximately 2.95%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.92 against the original $87.57/share purchase price. This works out to a yield on cost of 3.37%.
Here’s one more great investment quote before you go:
“There is nothing riskier than the widespread perception that there is no risk.” — Howard Marks
