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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

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 TJX Companies (NYSE: TJX) back in 2012, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 10/18/2012
$10,000

10/18/2012
  $34,746

10/17/2022
End date: 10/17/2022
Start price/share: $21.62
End price/share: $65.89
Starting shares: 462.53
Ending shares: 527.18
Dividends reinvested/share: $5.91
Total return: 247.36%
Average annual return: 13.26%
Starting investment: $10,000.00
Ending investment: $34,746.71

As shown above, the decade-long investment result worked out quite well, with an annualized rate of return of 13.26%. This would have turned a $10K investment made 10 years ago into $34,746.71 today (as of 10/17/2022). On a total return basis, that’s a result of 247.36% (something to think about: how might TJX shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that TJX Companies paid investors a total of $5.91/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 1.18/share, we calculate that TJX has a current yield of approximately 1.79%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.18 against the original $21.62/share purchase price. This works out to a yield on cost of 8.28%.

One more piece of investment wisdom to leave you with:
“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.” — Seth Klarman