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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 Morgan Stanley (NYSE: MS)? Today, we examine the outcome of a twenty year investment into the stock back in 2000.

Start date: 01/31/2000


End date: 01/30/2020
Start price/share: $66.25
End price/share: $53.82
Starting shares: 150.94
Ending shares: 254.93
Dividends reinvested/share: $29.07
Total return: 37.20%
Average annual return: 1.59%
Starting investment: $10,000.00
Ending investment: $13,711.79

The above analysis shows the twenty year investment result worked out as follows, with an annualized rate of return of 1.59%. This would have turned a $10K investment made 20 years ago into $13,711.79 today (as of 01/30/2020). On a total return basis, that’s a result of 37.20% (something to think about: how might MS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Morgan Stanley paid investors a total of $29.07/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 1.4/share, we calculate that MS has a current yield of approximately 2.60%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.4 against the original $66.25/share purchase price. This works out to a yield on cost of 3.92%.

Here’s one more great investment quote before you go:
“Never is there a better time to buy a stock than when a basically sound company, for whatever reason, temporarily falls out of favor with the investment community.” — Geraldine Weiss