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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 AmerisourceBergen Corp. (NYSE: ABC)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.

Start date: 10/08/1999


End date: 10/07/2019
Start price/share: $5.24
End price/share: $81.86
Starting shares: 1,908.40
Ending shares: 2,355.13
Dividends reinvested/share: $11.46
Total return: 1,827.91%
Average annual return: 15.94%
Starting investment: $10,000.00
Ending investment: $192,916.71

The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 15.94%. This would have turned a $10K investment made 20 years ago into $192,916.71 today (as of 10/07/2019). On a total return basis, that’s a result of 1,827.91% (something to think about: how might ABC shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that AmerisourceBergen Corp. paid investors a total of $11.46/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 1.6/share, we calculate that ABC has a current yield of approximately 1.95%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.6 against the original $5.24/share purchase price. This works out to a yield on cost of 37.21%.

Here’s one more great investment quote before you go:
“When you sell in desperation, you always sell cheap.” — Peter Lynch