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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

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 “buy-and-hold” 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 ex-date 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