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

— 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 NetApp, Inc. (NASD: NTAP)? Today, we examine the outcome of a twenty year investment into the stock back in 2000.

Start date: 10/16/2000


End date: 10/13/2020
Start price/share: $133.56
End price/share: $46.88
Starting shares: 74.87
Ending shares: 89.44
Dividends reinvested/share: $8.02
Total return: -58.07%
Average annual return: -4.25%
Starting investment: $10,000.00
Ending investment: $4,194.42

As shown above, the twenty year investment result worked out poorly, with an annualized rate of return of -4.25%. This would have turned a $10K investment made 20 years ago into $4,194.42 today (as of 10/13/2020). On a total return basis, that’s a result of -58.07% (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 $8.02/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 4.10%. 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 $133.56/share purchase price. This works out to a yield on cost of 3.07%.

More investment wisdom to ponder:
“Successful investing is anticipating the anticipations of others.” — John Maynard Keynes