Capital One’s financial investment of $ 10,000 in 2011 has become this today
“Only buy something that you would be perfectly happy to keep if the market closed for 10 years.”
– Warren Buffett
Warren Buffett’s wisdom reflects a value-based investment philosophy whereby investors buy stocks in a Business, and encourages strategic thinking on investment horizon. Before placing a buy order for a stock, a great question we can ask ourselves is whether we would still be comfortable making the investment. if we couldn’t sell it for many years?
A “buy and hold” approach may require a time horizon that spans an extended period of time – perhaps even over a ten-year holding period. Suppose such a “buy and hold” investor considered purchasing shares of Capital One Financial Corp (NYSE: COF) in 2011. Let’s see how such an investment would have worked for this buy and hold transaction. . investor:
|Starting price / share:||$ 42.06|
|Final price / share:||$ 162.10|
|End of actions:||278.40|
|Dividends reinvested / unit:||$ 13.30|
|Average annual yield:||16.25%|
|Initial investment:||$ 10,000.00|
|End of investment:||$ 45,111.57|
As noted above, the ten-year investment result has performed exceptionally well, with an annualized rate of return of 16.25%. This would have turned a $ 10,000 investment made 10 years ago into $ 45,111.57 today (as of 10/13/2021). On a total return basis this is a result of 351.29% (something to consider: how might COF stocks behave over the course of the Following 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Dividends are always an important investment factor to consider, and Capital One Financial Corp has paid out $ 13.30 / share in dividends to shareholders over the past 10 years we looked at above. Lots of investors alone investing in stocks that pay dividends, so this component of total return is always an important consideration. Automated reinvestment of dividends in additional stocks can be a great way for an investor to compound their returns. The above calculations are made assuming that dividends received over time are reinvested (the calculations use the closing price on the ex-date).
Based on the most recent annualized dividend rate of 2.4 / share, we calculate that the COF has a current yield of around 1.48%. Another interesting data point we can look at is “return on cost” – in other words, we can express the current annualized dividend of 2.4 from the original purchase price of $ 42.06 / share. . This corresponds to a return on cost of 3.52%.
Another great investment quote to consider:
“A risk-reward ratio is important, but so is an aggravation-satisfaction ratio. “ – Muriel Siebert