“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 two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Lam Research Corp (NASD: LRCX)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.
| Start date: | 11/15/1999 |
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| End date: | 11/12/2019 | ||||
| Start price/share: | $28.71 | ||||
| End price/share: | $270.01 | ||||
| Starting shares: | 348.31 | ||||
| Ending shares: | 380.22 | ||||
| Dividends reinvested/share: | $11.97 | ||||
| Total return: | 926.64% | ||||
| Average annual return: | 12.35% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $102,739.78 | ||||
As shown above, the two-decade investment result worked out quite well, with an annualized rate of return of 12.35%. This would have turned a $10K investment made 20 years ago into $102,739.78 today (as of 11/12/2019). On a total return basis, that’s a result of 926.64% (something to think about: how might LRCX shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Lam Research Corp paid investors a total of $11.97/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 4.6/share, we calculate that LRCX has a current yield of approximately 1.70%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.6 against the original $28.71/share purchase price. This works out to a yield on cost of 5.92%.
Another great investment quote to think about:
“I’d like to live as a poor man with lots of money.” — Pablo Picasso
