“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 American Airlines Group Inc (NASD: AAL)? Today, we examine the outcome of a decade-long investment into the stock back in 2013.
| Start date: | 10/31/2013 |
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| End date: | 10/30/2023 | ||||
| Start price/share: | $21.97 | ||||
| End price/share: | $11.18 | ||||
| Starting shares: | 455.17 | ||||
| Ending shares: | 482.89 | ||||
| Dividends reinvested/share: | $2.30 | ||||
| Total return: | -46.01% | ||||
| Average annual return: | -5.98% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $5,396.71 | ||||
As we can see, the decade-long investment result worked out poorly, with an annualized rate of return of -5.98%. This would have turned a $10K investment made 10 years ago into $5,396.71 today (as of 10/30/2023). On a total return basis, that’s a result of -46.01% (something to think about: how might AAL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that American Airlines Group Inc paid investors a total of $2.30/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 .4/share, we calculate that AAL has a current yield of approximately 3.58%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .4 against the original $21.97/share purchase price. This works out to a yield on cost of 16.29%.
One more piece of investment wisdom to leave you with:
“Don’t wait for the perfect time, you will wait forever. Always take advantage of the time you’re given and make it perfect.” — Daymond John
