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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 investment philosophy practiced by Warren Buffett calls for investors to take a long-term horizon when making an investment, such as a decade-long holding period (or even longer), and reconsider making the investment in the first place if unable to envision holding the stock for at least five years. Today, we look at how such a long-term strategy would have done for investors in American Airlines Group Inc (NASD: AAL) back in 2012, holding through to today.

Start date: 11/30/2012


End date: 11/29/2022
Start price/share: $12.89
End price/share: $14.14
Starting shares: 775.80
Ending shares: 823.04
Dividends reinvested/share: $2.30
Total return: 16.38%
Average annual return: 1.53%
Starting investment: $10,000.00
Ending investment: $11,640.24

As we can see, the decade-long investment result worked out as follows, with an annualized rate of return of 1.53%. This would have turned a $10K investment made 10 years ago into $11,640.24 today (as of 11/29/2022). On a total return basis, that’s a result of 16.38% (something to think about: how might AAL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Beyond share price change, another component of AAL’s total return these past 10 years has been the payment by American Airlines Group Inc of $2.30/share in dividends to shareholders. Automatic reinvestment of dividends can be a wonderful way to compound returns, and for the above calculations we presume that dividends are reinvested into additional shares of stock. (For the purpose of these calcuations, the closing price on ex-date is used).

Based upon the most recent annualized dividend rate of .4/share, we calculate that AAL has a current yield of approximately 2.83%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .4 against the original $12.89/share purchase price. This works out to a yield on cost of 21.96%.

Another great investment quote to think about:
“While it might seem that anyone can be a value investor, the essential characteristics of this type of investor-patience, discipline, and risk aversion-may well be genetically determined.” — Seth Klarman