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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 Goldman Sachs Group Inc (the (NYSE: GS)? Today, we examine the outcome of a twenty year investment into the stock back in 2000.

Start date: 08/03/2000


End date: 07/31/2020
Start price/share: $105.62
End price/share: $197.96
Starting shares: 94.67
Ending shares: 119.18
Dividends reinvested/share: $36.28
Total return: 135.93%
Average annual return: 4.38%
Starting investment: $10,000.00
Ending investment: $23,574.79

The above analysis shows the twenty year investment result worked out as follows, with an annualized rate of return of 4.38%. This would have turned a $10K investment made 20 years ago into $23,574.79 today (as of 07/31/2020). On a total return basis, that’s a result of 135.93% (something to think about: how might GS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Goldman Sachs Group Inc (the paid investors a total of $36.28/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 5/share, we calculate that GS has a current yield of approximately 2.53%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5 against the original $105.62/share purchase price. This works out to a yield on cost of 2.40%.

More investment wisdom to ponder:
“All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.” — Peter Lynch