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

— Warren Buffett

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a twenty year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Tyson Foods Inc (NYSE: TSN) back in 2000: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.

Start date: 03/27/2000
$10,000

03/27/2000
$77,411

03/26/2020
End date: 03/26/2020
Start price/share: $10.12
End price/share: $61.23
Starting shares: 987.65
Ending shares: 1,265.36
Dividends reinvested/share: $8.04
Total return: 674.78%
Average annual return: 10.77%
Starting investment: $10,000.00
Ending investment: $77,411.99

As we can see, the twenty year investment result worked out quite well, with an annualized rate of return of 10.77%. This would have turned a $10K investment made 20 years ago into $77,411.99 today (as of 03/26/2020). On a total return basis, that’s a result of 674.78% (something to think about: how might TSN shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Tyson Foods Inc paid investors a total of $8.04/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 TSN has a current yield of approximately 2.74%. 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 $10.12/share purchase price. This works out to a yield on cost of 27.08%.

One more investment quote to leave you with:
“Be fearful when others are greedy; be greedy when others are fearful.” — Warren Buffett