“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into General Motors Co (NYSE: GM)? Today, we examine the outcome of a ten year investment into the stock back in 2014.
| Start date: | 06/09/2014 |
|
|||
| End date: | 06/06/2024 | ||||
| Start price/share: | $36.50 | ||||
| End price/share: | $45.61 | ||||
| Starting shares: | 273.97 | ||||
| Ending shares: | 354.77 | ||||
| Dividends reinvested/share: | $9.10 | ||||
| Total return: | 61.81% | ||||
| Average annual return: | 4.93% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,180.68 | ||||
As shown above, the ten year investment result worked out as follows, with an annualized rate of return of 4.93%. This would have turned a $10K investment made 10 years ago into $16,180.68 today (as of 06/06/2024). On a total return basis, that’s a result of 61.81% (something to think about: how might GM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that General Motors Co paid investors a total of $9.10/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 .48/share, we calculate that GM has a current yield of approximately 1.05%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .48 against the original $36.50/share purchase price. This works out to a yield on cost of 2.88%.
More investment wisdom to ponder:
“Nearly every time I strayed from the herd, I’ve made a lot of money. Wandering away from the action is the way to find the new action.” — Jim Rogers
