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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 2012, and take a look at what happened to investors who asked that very question about Best Buy Inc (NYSE: BBY), by taking a look at the investment outcome over a ten year holding period.

Start date: 02/17/2012
$10,000

02/17/2012
$52,341

02/16/2022
End date: 02/16/2022
Start price/share: $25.71
End price/share: $99.63
Starting shares: 388.95
Ending shares: 525.34
Dividends reinvested/share: $15.22
Total return: 423.39%
Average annual return: 17.99%
Starting investment: $10,000.00
Ending investment: $52,341.44

As we can see, the ten year investment result worked out exceptionally well, with an annualized rate of return of 17.99%. This would have turned a $10K investment made 10 years ago into $52,341.44 today (as of 02/16/2022). On a total return basis, that’s a result of 423.39% (something to think about: how might BBY shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Best Buy Inc paid investors a total of $15.22/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 2.8/share, we calculate that BBY has a current yield of approximately 2.81%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.8 against the original $25.71/share purchase price. This works out to a yield on cost of 10.93%.

Another great investment quote to think about:
“October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” — Mark Twain