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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 above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a ten year period?

Today, let’s look backwards in time to 2011, and take a look at what happened to investors who asked that very question about Travelers Companies Inc (NYSE: TRV), by taking a look at the investment outcome over a ten year holding period.

Start date: 08/30/2011


End date: 08/27/2021
Start price/share: $50.21
End price/share: $162.09
Starting shares: 199.16
Ending shares: 253.91
Dividends reinvested/share: $25.91
Total return: 311.57%
Average annual return: 15.20%
Starting investment: $10,000.00
Ending investment: $41,164.68

As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 15.20%. This would have turned a $10K investment made 10 years ago into $41,164.68 today (as of 08/27/2021). On a total return basis, that’s a result of 311.57% (something to think about: how might TRV shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Travelers Companies Inc paid investors a total of $25.91/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 3.52/share, we calculate that TRV has a current yield of approximately 2.17%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.52 against the original $50.21/share purchase price. This works out to a yield on cost of 4.32%.

More investment wisdom to ponder:
“When everyone is going right, look left.” — Sam Zell