Photo credit: commons.wikimedia.org

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a decade-long period?

Today, let’s look backwards in time to 2013, and take a look at what happened to investors who asked that very question about United Parcel Service Inc (NYSE: UPS), by taking a look at the investment outcome over a decade-long holding period.

Start date: 03/25/2013
$10,000

03/25/2013
  $29,487

03/23/2023
End date: 03/23/2023
Start price/share: $84.61
End price/share: $185.29
Starting shares: 118.19
Ending shares: 159.07
Dividends reinvested/share: $37.20
Total return: 194.74%
Average annual return: 11.42%
Starting investment: $10,000.00
Ending investment: $29,487.06

As we can see, the decade-long investment result worked out quite well, with an annualized rate of return of 11.42%. This would have turned a $10K investment made 10 years ago into $29,487.06 today (as of 03/23/2023). On a total return basis, that’s a result of 194.74% (something to think about: how might UPS 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 UPS’s total return these past 10 years has been the payment by United Parcel Service Inc of $37.20/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 6.48/share, we calculate that UPS has a current yield of approximately 3.50%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 6.48 against the original $84.61/share purchase price. This works out to a yield on cost of 4.14%.

One more investment quote to leave you with:
“Spend each day trying to be a little wiser than you were when you woke up.” — Charlie Munger