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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

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 AbbVie Inc (NYSE: ABBV) back in 2013, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 05/15/2013
$10,000

05/15/2013
  $48,047

05/12/2023
End date: 05/12/2023
Start price/share: $46.03
End price/share: $147.15
Starting shares: 217.25
Ending shares: 326.64
Dividends reinvested/share: $35.71
Total return: 380.66%
Average annual return: 17.00%
Starting investment: $10,000.00
Ending investment: $48,047.61

As shown above, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 17.00%. This would have turned a $10K investment made 10 years ago into $48,047.61 today (as of 05/12/2023). On a total return basis, that’s a result of 380.66% (something to think about: how might ABBV shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that AbbVie Inc paid investors a total of $35.71/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 5.92/share, we calculate that ABBV has a current yield of approximately 4.02%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.92 against the original $46.03/share purchase price. This works out to a yield on cost of 8.73%.

One more investment quote to leave you with:
“We ignore outlooks and forecasts… we’re lousy at it and we admit it … everyone else is lousy too, but most people won’t admit it.” — Martin Whitman