“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 decade-long 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 Globe Life Inc (NYSE: GL), by taking a look at the investment outcome over a decade-long holding period.
| Start date: | 11/25/2014 |
|
|||
| End date: | 11/22/2024 | ||||
| Start price/share: | $53.93 | ||||
| End price/share: | $110.48 | ||||
| Starting shares: | 185.43 | ||||
| Ending shares: | 201.79 | ||||
| Dividends reinvested/share: | $7.16 | ||||
| Total return: | 122.93% | ||||
| Average annual return: | 8.35% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,299.19 | ||||
As shown above, the decade-long investment result worked out well, with an annualized rate of return of 8.35%. This would have turned a $10K investment made 10 years ago into $22,299.19 today (as of 11/22/2024). On a total return basis, that’s a result of 122.93% (something to think about: how might GL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Globe Life Inc paid investors a total of $7.16/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 .96/share, we calculate that GL has a current yield of approximately 0.87%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .96 against the original $53.93/share purchase price. This works out to a yield on cost of 1.61%.
More investment wisdom to ponder:
“Calling someone who trades actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic.” — Warren Buffett
