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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 Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into PepsiCo Inc (NASD: PEP)? Today, we examine the outcome of a ten year investment into the stock back in 2012.

Start date: 12/28/2012


End date: 12/27/2022
Start price/share: $68.02
End price/share: $183.07
Starting shares: 147.02
Ending shares: 195.95
Dividends reinvested/share: $33.85
Total return: 258.72%
Average annual return: 13.62%
Starting investment: $10,000.00
Ending investment: $35,867.39

As we can see, the ten year investment result worked out quite well, with an annualized rate of return of 13.62%. This would have turned a $10K investment made 10 years ago into $35,867.39 today (as of 12/27/2022). On a total return basis, that’s a result of 258.72% (something to think about: how might PEP shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that PepsiCo Inc paid investors a total of $33.85/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 4.6/share, we calculate that PEP has a current yield of approximately 2.51%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.6 against the original $68.02/share purchase price. This works out to a yield on cost of 3.69%.

Here’s one more great investment quote before you go:
“I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.” — Charlie Munger