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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a ten year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Allegion plc (NYSE: ALLE) back in 2013: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full ten year investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.

Start date: 12/19/2013
$10,000

12/19/2013
  $29,232

12/18/2023
End date: 12/18/2023
Start price/share: $44.45
End price/share: $117.95
Starting shares: 224.97
Ending shares: 247.92
Dividends reinvested/share: $9.30
Total return: 192.42%
Average annual return: 11.32%
Starting investment: $10,000.00
Ending investment: $29,232.07

As shown above, the ten year investment result worked out quite well, with an annualized rate of return of 11.32%. This would have turned a $10K investment made 10 years ago into $29,232.07 today (as of 12/18/2023). On a total return basis, that’s a result of 192.42% (something to think about: how might ALLE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Allegion plc paid investors a total of $9.30/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 1.8/share, we calculate that ALLE has a current yield of approximately 1.53%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.8 against the original $44.45/share purchase price. This works out to a yield on cost of 3.44%.

Here’s one more great investment quote before you go:
“Those who do not remember the past are condemned to repeat it.” — George Santayana