“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 ten year 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 Rollins, Inc. (NYSE: ROL), by taking a look at the investment outcome over a ten year holding period.
| Start date: | 12/12/2013 |
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| End date: | 12/11/2023 | ||||
| Start price/share: | $8.63 | ||||
| End price/share: | $41.63 | ||||
| Starting shares: | 1,158.75 | ||||
| Ending shares: | 1,328.00 | ||||
| Dividends reinvested/share: | $3.11 | ||||
| Total return: | 452.85% | ||||
| Average annual return: | 18.64% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $55,273.22 | ||||
The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 18.64%. This would have turned a $10K investment made 10 years ago into $55,273.22 today (as of 12/11/2023). On a total return basis, that’s a result of 452.85% (something to think about: how might ROL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Rollins, Inc. paid investors a total of $3.11/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 .6/share, we calculate that ROL has a current yield of approximately 1.44%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .6 against the original $8.63/share purchase price. This works out to a yield on cost of 16.69%.
One more piece of investment wisdom to leave you with:
“You make most of your money in a bear market, you just don’t realize it at the time.” — Shelby Davis
