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

— 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 US Bancorp (NYSE: USB)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.

Start date: 12/02/1999


End date: 11/29/2019
Start price/share: $25.06
End price/share: $60.03
Starting shares: 399.00
Ending shares: 734.14
Dividends reinvested/share: $19.84
Total return: 340.70%
Average annual return: 7.70%
Starting investment: $10,000.00
Ending investment: $44,105.28

As we can see, the two-decade investment result worked out well, with an annualized rate of return of 7.70%. This would have turned a $10K investment made 20 years ago into $44,105.28 today (as of 11/29/2019). On a total return basis, that’s a result of 340.70% (something to think about: how might USB shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that US Bancorp paid investors a total of $19.84/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 1.68/share, we calculate that USB has a current yield of approximately 2.80%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.68 against the original $25.06/share purchase price. This works out to a yield on cost of 11.17%.

One more investment quote to leave you with:
“You can get in much more trouble with a good idea than a bad idea, because you forget that the good idea has limits.” — Benjamin Graham