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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— Warren Buffett

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a two-decade holding period for an investor who was considering Johnson Controls International plc (NYSE: JCI) back in 2000, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 11/03/2000


End date: 11/02/2020
Start price/share: $9.92
End price/share: $43.94
Starting shares: 1,008.06
Ending shares: 2,172.68
Dividends reinvested/share: $23.43
Total return: 854.68%
Average annual return: 11.94%
Starting investment: $10,000.00
Ending investment: $95,552.68

As shown above, the two-decade investment result worked out quite well, with an annualized rate of return of 11.94%. This would have turned a $10K investment made 20 years ago into $95,552.68 today (as of 11/02/2020). On a total return basis, that’s a result of 854.68% (something to think about: how might JCI shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Johnson Controls International plc paid investors a total of $23.43/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 1.04/share, we calculate that JCI has a current yield of approximately 2.37%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.04 against the original $9.92/share purchase price. This works out to a yield on cost of 23.89%.

Another great investment quote to think about:
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” — George Soros