“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a decade-long period?
Today, let’s look backwards in time to 2013, and take a look at what happened to investors who asked that very question about The Cigna Group (NYSE: CI), by taking a look at the investment outcome over a decade-long holding period.
| Start date: | 09/03/2013 |
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| End date: | 08/31/2023 | ||||
| Start price/share: | $79.46 | ||||
| End price/share: | $276.26 | ||||
| Starting shares: | 125.85 | ||||
| Ending shares: | 131.68 | ||||
| Dividends reinvested/share: | $11.22 | ||||
| Total return: | 263.77% | ||||
| Average annual return: | 13.79% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $36,382.06 | ||||
As we can see, the decade-long investment result worked out quite well, with an annualized rate of return of 13.79%. This would have turned a $10K investment made 10 years ago into $36,382.06 today (as of 08/31/2023). On a total return basis, that’s a result of 263.77% (something to think about: how might CI shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that The Cigna Group paid investors a total of $11.22/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 4.92/share, we calculate that CI 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 4.92 against the original $79.46/share purchase price. This works out to a yield on cost of 2.24%.
Here’s one more great investment quote before you go:
“If you’re looking for a home run, a great investment for five years or 10 years or more, then the only way to beat this enormous fog that covers the future is to identify a long-term trend that will give a particular business some sort of edge.” — Ralph Wanger
