“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a decade-long holding period potentially?
For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 10 years to 2014, investors considering an investment into shares of Rockwell Automation, Inc. (NYSE: ROK) may have been pondering this very question and thinking about their potential investment result over a full decade-long time horizon. Here’s how that would have worked out.
| Start date: | 05/22/2014 |
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| End date: | 05/21/2024 | ||||
| Start price/share: | $119.88 | ||||
| End price/share: | $270.36 | ||||
| Starting shares: | 83.42 | ||||
| Ending shares: | 102.06 | ||||
| Dividends reinvested/share: | $37.82 | ||||
| Total return: | 175.92% | ||||
| Average annual return: | 10.68% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $27,601.52 | ||||
The above analysis shows the decade-long investment result worked out quite well, with an annualized rate of return of 10.68%. This would have turned a $10K investment made 10 years ago into $27,601.52 today (as of 05/21/2024). On a total return basis, that’s a result of 175.92% (something to think about: how might ROK shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Always an important consideration with a dividend-paying company is: should we reinvest our dividends?Over the past 10 years, Rockwell Automation, Inc. has paid $37.82/share in dividends. For the above analysis, we assume that the investor reinvests dividends into new shares of stock (for the above calculations, the reinvestment is performed using closing price on ex-div date for that dividend).
Based upon the most recent annualized dividend rate of 5/share, we calculate that ROK has a current yield of approximately 1.85%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5 against the original $119.88/share purchase price. This works out to a yield on cost of 1.54%.
One more piece of investment wisdom to leave you with:
“Only when the tide goes out do you discover who’s been swimming naked.” — Warren Buffett
