“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 ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Visa Inc (NYSE: V)? Today, we examine the outcome of a ten year investment into the stock back in 2012.
| Start date: | 03/08/2012 |
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| End date: | 03/07/2022 | ||||
| Start price/share: | $29.49 | ||||
| End price/share: | $190.70 | ||||
| Starting shares: | 339.10 | ||||
| Ending shares: | 364.21 | ||||
| Dividends reinvested/share: | $7.70 | ||||
| Total return: | 594.55% | ||||
| Average annual return: | 21.38% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $69,454.74 | ||||
As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 21.38%. This would have turned a $10K investment made 10 years ago into $69,454.74 today (as of 03/07/2022). On a total return basis, that’s a result of 594.55% (something to think about: how might V shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Visa Inc paid investors a total of $7.70/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 1.5/share, we calculate that V has a current yield of approximately 0.79%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.5 against the original $29.49/share purchase price. This works out to a yield on cost of 2.68%.
Here’s one more great investment quote before you go:
“Every once in a while, the market does something so stupid it takes your breath away.” — Jim Cramer
