
“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 KLA Corp (NASD: KLAC) back in 2015, bought the stock, ignored the market’s ups and downs, and simply held through to today.
Start date: | 02/03/2015 |
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End date: | 01/31/2025 | ||||
Start price/share: | $63.47 | ||||
End price/share: | $738.24 | ||||
Starting shares: | 157.55 | ||||
Ending shares: | 192.89 | ||||
Dividends reinvested/share: | $35.84 | ||||
Total return: | 1,324.00% | ||||
Average annual return: | 30.42% | ||||
Starting investment: | $10,000.00 | ||||
Ending investment: | $142,377.70 |
As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 30.42%. This would have turned a $10K investment made 10 years ago into $142,377.70 today (as of 01/31/2025). On a total return basis, that’s a result of 1,324.00% (something to think about: how might KLAC shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that KLA Corp paid investors a total of $35.84/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 6.8/share, we calculate that KLAC has a current yield of approximately 0.92%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 6.8 against the original $63.47/share purchase price. This works out to a yield on cost of 1.45%.
One more investment quote to leave you with:
“A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price.” — Benjamin Graham