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

— Warren Buffett

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a twenty year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into FLIR Systems, Inc. (NASD: FLIR) back in 1999: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.

Start date: 08/16/1999
$10,000

08/16/1999
$251,849

08/13/2019
End date: 08/13/2019
Start price/share: $2.10
End price/share: $47.35
Starting shares: 4,761.90
Ending shares: 5,319.46
Dividends reinvested/share: $3.78
Total return: 2,418.77%
Average annual return: 17.50%
Starting investment: $10,000.00
Ending investment: $251,849.50

The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 17.50%. This would have turned a $10K investment made 20 years ago into $251,849.50 today (as of 08/13/2019). On a total return basis, that’s a result of 2,418.77% (something to think about: how might FLIR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that FLIR Systems, Inc. paid investors a total of $3.78/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 .68/share, we calculate that FLIR has a current yield of approximately 1.44%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .68 against the original $2.10/share purchase price. This works out to a yield on cost of 68.57%.

Here’s one more great investment quote before you go:
“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw, irrational emotion under control.” — Charlie Munger