“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a ten year holding period for an investor who was considering Royal Caribbean Group (NYSE: RCL) back in 2014, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 11/07/2014 |
|
|||
| End date: | 11/06/2024 | ||||
| Start price/share: | $67.20 | ||||
| End price/share: | $226.64 | ||||
| Starting shares: | 148.81 | ||||
| Ending shares: | 168.28 | ||||
| Dividends reinvested/share: | $12.26 | ||||
| Total return: | 281.39% | ||||
| Average annual return: | 14.32% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $38,154.05 | ||||
As we can see, the ten year investment result worked out quite well, with an annualized rate of return of 14.32%. This would have turned a $10K investment made 10 years ago into $38,154.05 today (as of 11/06/2024). On a total return basis, that’s a result of 281.39% (something to think about: how might RCL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Royal Caribbean Group paid investors a total of $12.26/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 1.6/share, we calculate that RCL has a current yield of approximately 0.71%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.6 against the original $67.20/share purchase price. This works out to a yield on cost of 1.06%.
Another great investment quote to think about:
“When everyone is going right, look left.” — Sam Zell
