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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 Amgen Inc (NASD: AMGN) back in 2012: 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: 02/07/2012


End date: 02/04/2022
Start price/share: $69.17
End price/share: $222.11
Starting shares: 144.57
Ending shares: 184.91
Dividends reinvested/share: $42.04
Total return: 310.71%
Average annual return: 15.17%
Starting investment: $10,000.00
Ending investment: $41,057.61

As shown above, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 15.17%. This would have turned a $10K investment made 10 years ago into $41,057.61 today (as of 02/04/2022). On a total return basis, that’s a result of 310.71% (something to think about: how might AMGN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Amgen Inc paid investors a total of $42.04/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 7.76/share, we calculate that AMGN has a current yield of approximately 3.49%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 7.76 against the original $69.17/share purchase price. This works out to a yield on cost of 5.05%.

One more investment quote to leave you with:
“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.” — George Soros