“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 Unum Group (NYSE: UNM)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
| Start date: | 11/16/2010 |
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| End date: | 11/13/2020 | ||||
| Start price/share: | $21.59 | ||||
| End price/share: | $20.88 | ||||
| Starting shares: | 463.18 | ||||
| Ending shares: | 594.02 | ||||
| Dividends reinvested/share: | $7.45 | ||||
| Total return: | 24.03% | ||||
| Average annual return: | 2.18% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,406.78 | ||||
As we can see, the ten year investment result worked out as follows, with an annualized rate of return of 2.18%. This would have turned a $10K investment made 10 years ago into $12,406.78 today (as of 11/13/2020). On a total return basis, that’s a result of 24.03% (something to think about: how might UNM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Unum Group paid investors a total of $7.45/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 1.14/share, we calculate that UNM has a current yield of approximately 5.46%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.14 against the original $21.59/share purchase price. This works out to a yield on cost of 25.29%.
One more piece of investment wisdom to leave you with:
“We ignore outlooks and forecasts… we’re lousy at it and we admit it … everyone else is lousy too, but most people won’t admit it.” — Martin Whitman
