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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 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 NetApp, Inc. (NASD: NTAP)? Today, we examine the outcome of a two-decade investment into the stock back in 2000.

Start date: 05/08/2000


End date: 05/05/2020
Start price/share: $63.19
End price/share: $41.20
Starting shares: 158.26
Ending shares: 185.01
Dividends reinvested/share: $7.06
Total return: -23.78%
Average annual return: -1.35%
Starting investment: $10,000.00
Ending investment: $7,619.20

As we can see, the two-decade investment result worked out poorly, with an annualized rate of return of -1.35%. This would have turned a $10K investment made 20 years ago into $7,619.20 today (as of 05/05/2020). On a total return basis, that’s a result of -23.78% (something to think about: how might NTAP shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that NetApp, Inc. paid investors a total of $7.06/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 1.92/share, we calculate that NTAP has a current yield of approximately 4.66%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.92 against the original $63.19/share purchase price. This works out to a yield on cost of 7.37%.

More investment wisdom to ponder:
“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.” — William Feather