“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Lincoln National Corp. (NYSE: LNC)? Today, we examine the outcome of a decade-long investment into the stock back in 2013.
| Start date: | 05/22/2013 |
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| End date: | 05/19/2023 | ||||
| Start price/share: | $34.90 | ||||
| End price/share: | $20.95 | ||||
| Starting shares: | 286.53 | ||||
| Ending shares: | 369.67 | ||||
| Dividends reinvested/share: | $12.62 | ||||
| Total return: | -22.55% | ||||
| Average annual return: | -2.52% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $7,747.93 | ||||
The above analysis shows the decade-long investment result worked out poorly, with an annualized rate of return of -2.52%. This would have turned a $10K investment made 10 years ago into $7,747.93 today (as of 05/19/2023). On a total return basis, that’s a result of -22.55% (something to think about: how might LNC shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Lincoln National Corp. paid investors a total of $12.62/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 1.8/share, we calculate that LNC has a current yield of approximately 8.59%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.8 against the original $34.90/share purchase price. This works out to a yield on cost of 24.61%.
Another great investment quote to think about:
“If you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don’t need extraordinary intelligence to succeed as an investor.” — Warren Buffett
