“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 CVS Health Corporation (NYSE: CVS)? Today, we examine the outcome of a decade-long investment into the stock back in 2013.
| Start date: | 09/09/2013 |
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| End date: | 09/06/2023 | ||||
| Start price/share: | $58.77 | ||||
| End price/share: | $65.51 | ||||
| Starting shares: | 170.15 | ||||
| Ending shares: | 216.14 | ||||
| Dividends reinvested/share: | $18.44 | ||||
| Total return: | 41.59% | ||||
| Average annual return: | 3.54% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,159.25 | ||||
The above analysis shows the decade-long investment result worked out as follows, with an annualized rate of return of 3.54%. This would have turned a $10K investment made 10 years ago into $14,159.25 today (as of 09/06/2023). On a total return basis, that’s a result of 41.59% (something to think about: how might CVS shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that CVS Health Corporation paid investors a total of $18.44/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 2.42/share, we calculate that CVS has a current yield of approximately 3.69%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.42 against the original $58.77/share purchase price. This works out to a yield on cost of 6.28%.
One more piece of investment wisdom to leave you with:
“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” — Albert Einstein
