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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Lockheed Martin Corp (NYSE: LMT)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.

Start date: 06/28/1999


End date: 06/26/2019
Start price/share: $35.75
End price/share: $359.50
Starting shares: 279.72
Ending shares: 461.19
Dividends reinvested/share: $64.47
Total return: 1,557.97%
Average annual return: 15.07%
Starting investment: $10,000.00
Ending investment: $165,860.63

The above analysis shows the two-decade investment result worked out exceptionally well, with an annualized rate of return of 15.07%. This would have turned a $10K investment made 20 years ago into $165,860.63 today (as of 06/26/2019). On a total return basis, that’s a result of 1,557.97% (something to think about: how might LMT shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Lockheed Martin Corp paid investors a total of $64.47/share in dividends over the 20 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 8.8/share, we calculate that LMT has a current yield of approximately 2.45%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 8.8 against the original $35.75/share purchase price. This works out to a yield on cost of 6.85%.

Another great investment quote to think about:
“Be fearful when others are greedy; be greedy when others are fearful.” — Warren Buffett