“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 ten year holding period for an investor who was considering Genuine Parts Co. (NYSE: GPC) back in 2013, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 01/09/2013 |
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| End date: | 01/06/2023 | ||||
| Start price/share: | $65.72 | ||||
| End price/share: | $170.84 | ||||
| Starting shares: | 152.16 | ||||
| Ending shares: | 201.85 | ||||
| Dividends reinvested/share: | $28.17 | ||||
| Total return: | 244.84% | ||||
| Average annual return: | 13.18% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $34,478.60 | ||||
As shown above, the ten year investment result worked out quite well, with an annualized rate of return of 13.18%. This would have turned a $10K investment made 10 years ago into $34,478.60 today (as of 01/06/2023). On a total return basis, that’s a result of 244.84% (something to think about: how might GPC shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Genuine Parts Co. paid investors a total of $28.17/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 3.58/share, we calculate that GPC has a current yield of approximately 2.10%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.58 against the original $65.72/share purchase price. This works out to a yield on cost of 3.20%.
One more investment quote to leave you with:
“If I’ve learned one thing in this life it’s this: even if you lose, don’t lose the lesson.” — Daymond John
