Photo credit: commons.wikimedia.org

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a decade-long holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Apple Inc (NASD: AAPL) back in 2015. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 01/27/2015
$10,000

01/27/2015
$91,652

01/24/2025
End date: 01/24/2025
Start price/share: $27.29
End price/share: $222.78
Starting shares: 366.43
Ending shares: 411.38
Dividends reinvested/share: $7.67
Total return: 816.48%
Average annual return: 24.80%
Starting investment: $10,000.00
Ending investment: $91,652.82

The above analysis shows the decade-long investment result worked out exceptionally well, with an annualized rate of return of 24.80%. This would have turned a $10K investment made 10 years ago into $91,652.82 today (as of 01/24/2025). On a total return basis, that’s a result of 816.48% (something to think about: how might AAPL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Apple Inc paid investors a total of $7.67/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/share, we calculate that AAPL has a current yield of approximately 0.45%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1 against the original $27.29/share purchase price. This works out to a yield on cost of 1.65%.

One more investment quote to leave you with:
“You can’t restate a dividend.” — Malon Wilkus