“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a decade-long holding period for an investor who was considering Brown & Brown Inc (NYSE: BRO) back in 2012, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 06/21/2012 |
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| End date: | 06/17/2022 | ||||
| Start price/share: | $13.17 | ||||
| End price/share: | $53.50 | ||||
| Starting shares: | 759.30 | ||||
| Ending shares: | 849.62 | ||||
| Dividends reinvested/share: | $2.80 | ||||
| Total return: | 354.55% | ||||
| Average annual return: | 16.36% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $45,464.93 | ||||
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 16.36%. This would have turned a $10K investment made 10 years ago into $45,464.93 today (as of 06/17/2022). On a total return basis, that’s a result of 354.55% (something to think about: how might BRO shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Brown & Brown Inc paid investors a total of $2.80/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 .41/share, we calculate that BRO has a current yield of approximately 0.77%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .41 against the original $13.17/share purchase price. This works out to a yield on cost of 5.85%.
Here’s one more great investment quote before you go:
“Don’t wait for the perfect time, you will wait forever. Always take advantage of the time you’re given and make it perfect.” — Daymond John
