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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 twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Jefferies Group Inc. (NYSE: JEF)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.

Start date: 09/13/1999


End date: 09/10/2019
Start price/share: $5.27
End price/share: $19.79
Starting shares: 1,897.53
Ending shares: 2,436.07
Dividends reinvested/share: $4.38
Total return: 382.10%
Average annual return: 8.18%
Starting investment: $10,000.00
Ending investment: $48,208.84

As shown above, the twenty year investment result worked out well, with an annualized rate of return of 8.18%. This would have turned a $10K investment made 20 years ago into $48,208.84 today (as of 09/10/2019). On a total return basis, that’s a result of 382.10% (something to think about: how might JEF shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Jefferies Group Inc. paid investors a total of $4.38/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 .5/share, we calculate that JEF has a current yield of approximately 2.53%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .5 against the original $5.27/share purchase price. This works out to a yield on cost of 48.01%.

One more piece of investment wisdom to leave you with:
“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” — Warren Buffett