“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 decade-long holding period for an investor who was considering Johnson Controls International plc (NYSE: JCI) back in 2014, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 12/08/2014 |
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| End date: | 12/05/2024 | ||||
| Start price/share: | $45.41 | ||||
| End price/share: | $83.09 | ||||
| Starting shares: | 220.22 | ||||
| Ending shares: | 310.04 | ||||
| Dividends reinvested/share: | $15.67 | ||||
| Total return: | 157.61% | ||||
| Average annual return: | 9.92% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $25,749.40 | ||||
As shown above, the decade-long investment result worked out well, with an annualized rate of return of 9.92%. This would have turned a $10K investment made 10 years ago into $25,749.40 today (as of 12/05/2024). On a total return basis, that’s a result of 157.61% (something to think about: how might JCI 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, Johnson Controls International plc has paid $15.67/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 1.48/share, we calculate that JCI has a current yield of approximately 1.78%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.48 against the original $45.41/share purchase price. This works out to a yield on cost of 3.92%.
Here’s one more great investment quote before you go:
“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.” — Seth Klarman
