“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Verizon Communications Inc (NYSE: VZ)? Today, we examine the outcome of a decade-long investment into the stock back in 2012.
| Start date: | 09/10/2012 |
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| End date: | 09/07/2022 | ||||
| Start price/share: | $44.06 | ||||
| End price/share: | $41.08 | ||||
| Starting shares: | 226.96 | ||||
| Ending shares: | 355.85 | ||||
| Dividends reinvested/share: | $23.26 | ||||
| Total return: | 46.18% | ||||
| Average annual return: | 3.87% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,616.93 | ||||
As shown above, the decade-long investment result worked out as follows, with an annualized rate of return of 3.87%. This would have turned a $10K investment made 10 years ago into $14,616.93 today (as of 09/07/2022). On a total return basis, that’s a result of 46.18% (something to think about: how might VZ shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Verizon Communications Inc paid investors a total of $23.26/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 2.56/share, we calculate that VZ has a current yield of approximately 6.23%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.56 against the original $44.06/share purchase price. This works out to a yield on cost of 14.14%.
One more investment quote to leave you with:
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” — Peter Lynch
