“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 “buyandhold” investor was considering an investment into Wabtec Corp (NYSE: WAB) 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:  11/08/2012 


End date:  11/07/2022  
Start price/share:  $40.16  
End price/share:  $96.42  
Starting shares:  249.00  
Ending shares:  261.37  
Dividends reinvested/share:  $3.81  
Total return:  152.02%  
Average annual return:  9.68%  
Starting investment:  $10,000.00  
Ending investment:  $25,199.06 
As shown above, the ten year investment result worked out well, with an annualized rate of return of 9.68%. This would have turned a $10K investment made 10 years ago into $25,199.06 today (as of 11/07/2022). On a total return basis, that’s a result of 152.02% (something to think about: how might WAB shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Wabtec Corp paid investors a total of $3.81/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 exdate is used for the reinvestment of a given dividend).
Based upon the most recent annualized dividend rate of .6/share, we calculate that WAB has a current yield of approximately 0.62%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .6 against the original $40.16/share purchase price. This works out to a yield on cost of 1.54%.
More investment wisdom to ponder:
“Markets can remain irrational longer than you can remain solvent.” — John Maynard Keynes