“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 HCA Healthcare Inc (NYSE: HCA), by taking a look at the investment outcome over a decade-long holding period.
| Start date: | 07/19/2013 |
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| End date: | 07/18/2023 | ||||
| Start price/share: | $38.63 | ||||
| End price/share: | $289.74 | ||||
| Starting shares: | 258.87 | ||||
| Ending shares: | 273.02 | ||||
| Dividends reinvested/share: | $9.13 | ||||
| Total return: | 691.03% | ||||
| Average annual return: | 22.97% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $79,111.16 | ||||
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 22.97%. This would have turned a $10K investment made 10 years ago into $79,111.16 today (as of 07/18/2023). On a total return basis, that’s a result of 691.03% (something to think about: how might HCA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that HCA Healthcare Inc paid investors a total of $9.13/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 2.4/share, we calculate that HCA has a current yield of approximately 0.83%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.4 against the original $38.63/share purchase price. This works out to a yield on cost of 2.15%.
More investment wisdom to ponder:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
