“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Fidelity National Information Services Inc (NYSE: FIS)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
| Start date: | 11/11/2010 |
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| End date: | 11/10/2020 | ||||
| Start price/share: | $27.59 | ||||
| End price/share: | $144.36 | ||||
| Starting shares: | 362.45 | ||||
| Ending shares: | 419.08 | ||||
| Dividends reinvested/share: | $9.86 | ||||
| Total return: | 504.98% | ||||
| Average annual return: | 19.71% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $60,496.80 | ||||
As we can see, the ten year investment result worked out exceptionally well, with an annualized rate of return of 19.71%. This would have turned a $10K investment made 10 years ago into $60,496.80 today (as of 11/10/2020). On a total return basis, that’s a result of 504.98% (something to think about: how might FIS shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Fidelity National Information Services Inc paid investors a total of $9.86/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 1.4/share, we calculate that FIS has a current yield of approximately 0.97%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.4 against the original $27.59/share purchase price. This works out to a yield on cost of 3.52%.
One more investment quote to leave you with:
“The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” — Seth Klarman
