“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 |
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| 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
