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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

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a ten year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into The Charles Schwab Corporation (NYSE: SCHW) back in 2012: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full ten year investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.

Start date: 10/01/2012


End date: 09/28/2022
Start price/share: $12.88
End price/share: $73.25
Starting shares: 776.40
Ending shares: 869.01
Dividends reinvested/share: $4.57
Total return: 536.55%
Average annual return: 20.34%
Starting investment: $10,000.00
Ending investment: $63,661.93

The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 20.34%. This would have turned a $10K investment made 10 years ago into $63,661.93 today (as of 09/28/2022). On a total return basis, that’s a result of 536.55% (something to think about: how might SCHW shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that The Charles Schwab Corporation paid investors a total of $4.57/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 .88/share, we calculate that SCHW has a current yield of approximately 1.20%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .88 against the original $12.88/share purchase price. This works out to a yield on cost of 9.32%.

One more investment quote to leave you with:
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” — Benjamin Graham