“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 eBay Inc. (NASD: EBAY)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.
| Start date: | 08/04/2011 |
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| End date: | 08/03/2021 | ||||
| Start price/share: | $12.64 | ||||
| End price/share: | $68.01 | ||||
| Starting shares: | 791.14 | ||||
| Ending shares: | 819.60 | ||||
| Dividends reinvested/share: | $1.56 | ||||
| Total return: | 457.41% | ||||
| Average annual return: | 18.73% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $55,720.27 | ||||
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 18.73%. This would have turned a $10K investment made 10 years ago into $55,720.27 today (as of 08/03/2021). On a total return basis, that’s a result of 457.41% (something to think about: how might EBAY shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Beyond share price change, another component of EBAY’s total return these past 10 years has been the payment by eBay Inc. of $1.56/share in dividends to shareholders. Automatic reinvestment of dividends can be a wonderful way to compound returns, and for the above calculations we presume that dividends are reinvested into additional shares of stock. (For the purpose of these calcuations, the closing price on ex-date is used).
Based upon the most recent annualized dividend rate of .72/share, we calculate that EBAY has a current yield of approximately 1.06%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .72 against the original $12.64/share purchase price. This works out to a yield on cost of 8.39%.
One more investment quote to leave you with:
“Money is better than poverty, if only for financial reasons.” — Woody Allen
