“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 ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Pentair PLC (NYSE: PNR)? Today, we examine the outcome of a ten year investment into the stock back in 2013.
| Start date: | 11/27/2013 |
|
|||
| End date: | 11/24/2023 | ||||
| Start price/share: | $47.86 | ||||
| End price/share: | $63.22 | ||||
| Starting shares: | 208.94 | ||||
| Ending shares: | 250.75 | ||||
| Dividends reinvested/share: | $8.25 | ||||
| Total return: | 58.52% | ||||
| Average annual return: | 4.72% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,857.75 | ||||
As shown above, the ten year investment result worked out as follows, with an annualized rate of return of 4.72%. This would have turned a $10K investment made 10 years ago into $15,857.75 today (as of 11/24/2023). On a total return basis, that’s a result of 58.52% (something to think about: how might PNR shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Pentair PLC paid investors a total of $8.25/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 .88/share, we calculate that PNR has a current yield of approximately 1.39%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .88 against the original $47.86/share purchase price. This works out to a yield on cost of 2.90%.
Another great investment quote to think about:
“A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett
