“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 DXC Technology Co (NYSE: DXC), by taking a look at the investment outcome over a ten year holding period.
| Start date: | 08/31/2012 |
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| End date: | 08/30/2022 | ||||
| Start price/share: | $16.00 | ||||
| End price/share: | $24.51 | ||||
| Starting shares: | 625.00 | ||||
| Ending shares: | 940.75 | ||||
| Dividends reinvested/share: | $13.41 | ||||
| Total return: | 130.58% | ||||
| Average annual return: | 8.71% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $23,056.55 | ||||
The above analysis shows the ten year investment result worked out well, with an annualized rate of return of 8.71%. This would have turned a $10K investment made 10 years ago into $23,056.55 today (as of 08/30/2022). On a total return basis, that’s a result of 130.58% (something to think about: how might DXC shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that DXC Technology Co paid investors a total of $13.41/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 .84/share, we calculate that DXC has a current yield of approximately 3.43%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .84 against the original $16.00/share purchase price. This works out to a yield on cost of 21.44%.
Here’s one more great investment quote before you go:
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” — Peter Lynch
