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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

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a ten year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of International Flavors & Fragrances Inc. (NYSE: IFF) back in 2012. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 10/31/2012


End date: 10/27/2022
Start price/share: $64.62
End price/share: $95.43
Starting shares: 154.75
Ending shares: 191.12
Dividends reinvested/share: $24.99
Total return: 82.39%
Average annual return: 6.20%
Starting investment: $10,000.00
Ending investment: $18,243.24

As we can see, the ten year investment result worked out well, with an annualized rate of return of 6.20%. This would have turned a $10K investment made 10 years ago into $18,243.24 today (as of 10/27/2022). On a total return basis, that’s a result of 82.39% (something to think about: how might IFF shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that International Flavors & Fragrances Inc. paid investors a total of $24.99/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 3.24/share, we calculate that IFF has a current yield of approximately 3.40%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.24 against the original $64.62/share purchase price. This works out to a yield on cost of 5.26%.

More investment wisdom to ponder:
“When I was young I thought that money was the most important thing in life; now that I am old I know that it is.” — Oscar Wilde