“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 decade-long holding period for an investor who was considering Tyson Foods Inc (NYSE: TSN) back in 2013, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 02/11/2013 |
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| End date: | 02/08/2023 | ||||
| Start price/share: | $23.64 | ||||
| End price/share: | $59.98 | ||||
| Starting shares: | 423.01 | ||||
| Ending shares: | 498.55 | ||||
| Dividends reinvested/share: | $10.83 | ||||
| Total return: | 199.03% | ||||
| Average annual return: | 11.58% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $29,904.27 | ||||
The above analysis shows the decade-long investment result worked out quite well, with an annualized rate of return of 11.58%. This would have turned a $10K investment made 10 years ago into $29,904.27 today (as of 02/08/2023). On a total return basis, that’s a result of 199.03% (something to think about: how might TSN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Tyson Foods Inc paid investors a total of $10.83/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 1.92/share, we calculate that TSN has a current yield of approximately 3.20%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.92 against the original $23.64/share purchase price. This works out to a yield on cost of 13.54%.
More investment wisdom to ponder:
“The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.” — T. Boone Pickens
