Photo credit:

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

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a ten year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Kimberly-Clark Corp. (NYSE: KMB) back in 2014. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 04/21/2014


End date: 04/17/2024
Start price/share: $106.37
End price/share: $125.96
Starting shares: 94.01
Ending shares: 130.60
Dividends reinvested/share: $41.07
Total return: 64.50%
Average annual return: 5.10%
Starting investment: $10,000.00
Ending investment: $16,442.50

The above analysis shows the ten year investment result worked out well, with an annualized rate of return of 5.10%. This would have turned a $10K investment made 10 years ago into $16,442.50 today (as of 04/17/2024). On a total return basis, that’s a result of 64.50% (something to think about: how might KMB shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Kimberly-Clark Corp. paid investors a total of $41.07/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 4.88/share, we calculate that KMB has a current yield of approximately 3.87%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.88 against the original $106.37/share purchase price. This works out to a yield on cost of 3.64%.

Another great investment quote to think about:
“The function of economic forecasting is to make astrology look respectable.” — John Galbraith