“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.
|Average annual return:||21.38%|
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