Photo credit:

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

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask 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 call for a time horizon that spans a long period of time — maybe even lasting for a two-decade holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of DENTSPLY SIRONA Inc (NASD: XRAY) back in 1999. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 06/07/1999


End date: 06/05/2019
Start price/share: $8.84
End price/share: $55.38
Starting shares: 1,131.22
Ending shares: 1,270.75
Dividends reinvested/share: $3.89
Total return: 603.74%
Average annual return: 10.24%
Starting investment: $10,000.00
Ending investment: $70,328.62

As shown above, the two-decade investment result worked out quite well, with an annualized rate of return of 10.24%. This would have turned a $10K investment made 20 years ago into $70,328.62 today (as of 06/05/2019). On a total return basis, that’s a result of 603.74% (something to think about: how might XRAY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that DENTSPLY SIRONA Inc paid investors a total of $3.89/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 .35/share, we calculate that XRAY has a current yield of approximately 0.63%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .35 against the original $8.84/share purchase price. This works out to a yield on cost of 7.13%.

One more investment quote to leave you with:
“I made my money by selling too soon.” — Bernard Baruch