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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

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a decade-long holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into PPG Industries Inc (NYSE: PPG) back in 2011: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full decade-long investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.

Start date: 08/30/2011


End date: 08/27/2021
Start price/share: $38.24
End price/share: $161.84
Starting shares: 261.51
Ending shares: 308.15
Dividends reinvested/share: $16.26
Total return: 398.71%
Average annual return: 17.43%
Starting investment: $10,000.00
Ending investment: $49,864.40

The above analysis shows the decade-long investment result worked out exceptionally well, with an annualized rate of return of 17.43%. This would have turned a $10K investment made 10 years ago into $49,864.40 today (as of 08/27/2021). On a total return basis, that’s a result of 398.71% (something to think about: how might PPG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that PPG Industries Inc paid investors a total of $16.26/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 2.36/share, we calculate that PPG has a current yield of approximately 1.46%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.36 against the original $38.24/share purchase price. This works out to a yield on cost of 3.82%.

One more piece of investment wisdom to leave you with:
“Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon. Few are willing and able to devote sufficient time and effort to become value investors, and only a fraction of those have the proper mind-set to succeed.” — Seth Klarman