“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 Qualcomm Inc (NASD: QCOM) back in 2012, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 10/01/2012 |
|
|||
| End date: | 09/29/2022 | ||||
| Start price/share: | $61.91 | ||||
| End price/share: | $114.84 | ||||
| Starting shares: | 161.52 | ||||
| Ending shares: | 214.10 | ||||
| Dividends reinvested/share: | $21.68 | ||||
| Total return: | 145.88% | ||||
| Average annual return: | 9.41% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $24,579.34 | ||||
As shown above, the decade-long investment result worked out well, with an annualized rate of return of 9.41%. This would have turned a $10K investment made 10 years ago into $24,579.34 today (as of 09/29/2022). On a total return basis, that’s a result of 145.88% (something to think about: how might QCOM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Qualcomm Inc paid investors a total of $21.68/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 3/share, we calculate that QCOM has a current yield of approximately 2.61%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3 against the original $61.91/share purchase price. This works out to a yield on cost of 4.22%.
Here’s one more great investment quote before you go:
“The person who starts simply with the idea of getting rich won’t succeed; you must have a larger ambition.” — John Rockefeller
