“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 2014, and take a look at what happened to investors who asked that very question about Zoetis Inc (NYSE: ZTS), by taking a look at the investment outcome over a ten year holding period.
| Start date: | 06/23/2014 |
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| End date: | 06/20/2024 | ||||
| Start price/share: | $32.64 | ||||
| End price/share: | $168.18 | ||||
| Starting shares: | 306.37 | ||||
| Ending shares: | 328.58 | ||||
| Dividends reinvested/share: | $7.58 | ||||
| Total return: | 452.60% | ||||
| Average annual return: | 18.64% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $55,247.34 | ||||
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 $55,247.34 today (as of 06/20/2024). On a total return basis, that’s a result of 452.60% (something to think about: how might ZTS shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Zoetis Inc paid investors a total of $7.58/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 1.728/share, we calculate that ZTS has a current yield of approximately 1.03%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.728 against the original $32.64/share purchase price. This works out to a yield on cost of 3.16%.
More investment wisdom to ponder:
“October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” — Mark Twain
