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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— Warren Buffett

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a twenty year holding period for an investor who was considering Rollins, Inc. (NYSE: ROL) back in 1999, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 09/20/1999
$10,000

09/20/1999
$328,601

09/18/2019
End date: 09/18/2019
Start price/share: $1.38
End price/share: $34.57
Starting shares: 7,246.38
Ending shares: 9,500.61
Dividends reinvested/share: $2.98
Total return: 3,184.36%
Average annual return: 19.07%
Starting investment: $10,000.00
Ending investment: $328,601.93

As we can see, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 19.07%. This would have turned a $10K investment made 20 years ago into $328,601.93 today (as of 09/18/2019). On a total return basis, that’s a result of 3,184.36% (something to think about: how might ROL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Rollins, Inc. paid investors a total of $2.98/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 .42/share, we calculate that ROL has a current yield of approximately 1.21%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .42 against the original $1.38/share purchase price. This works out to a yield on cost of 87.68%.

One more investment quote to leave you with:
“The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.” — T. Boone Pickens