“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 ten year period?
Today, let’s look backwards in time to 2014, and take a look at what happened to investors who asked that very question about Marsh & McLennan Companies Inc. (NYSE: MMC), by taking a look at the investment outcome over a ten year holding period.
| Start date: | 12/03/2014 |
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| End date: | 12/02/2024 | ||||
| Start price/share: | $57.50 | ||||
| End price/share: | $233.04 | ||||
| Starting shares: | 173.91 | ||||
| Ending shares: | 207.01 | ||||
| Dividends reinvested/share: | $18.97 | ||||
| Total return: | 382.41% | ||||
| Average annual return: | 17.03% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $48,233.22 | ||||
The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 17.03%. This would have turned a $10K investment made 10 years ago into $48,233.22 today (as of 12/02/2024). On a total return basis, that’s a result of 382.41% (something to think about: how might MMC shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Marsh & McLennan Companies Inc. paid investors a total of $18.97/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 3.26/share, we calculate that MMC has a current yield of approximately 1.40%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.26 against the original $57.50/share purchase price. This works out to a yield on cost of 2.43%.
More investment wisdom to ponder:
“Every day that you’re not selling an asset in your portfolio, you’re choosing to buy it.” — Sam Zell
