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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 MGM Resorts International (NYSE: MGM)? Today, we examine the outcome of a twenty year investment into the stock back in 2000.

Start date: 02/04/2000


End date: 02/03/2020
Start price/share: $22.16
End price/share: $31.21
Starting shares: 451.26
Ending shares: 476.59
Dividends reinvested/share: $1.54
Total return: 48.75%
Average annual return: 2.00%
Starting investment: $10,000.00
Ending investment: $14,862.70

As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 2.00%. This would have turned a $10K investment made 20 years ago into $14,862.70 today (as of 02/03/2020). On a total return basis, that’s a result of 48.75% (something to think about: how might MGM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that MGM Resorts International paid investors a total of $1.54/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 .52/share, we calculate that MGM has a current yield of approximately 1.67%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .52 against the original $22.16/share purchase price. This works out to a yield on cost of 7.54%.

One more investment quote to leave you with:
“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” — Warren Buffett