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

— 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 two-decade holding period possibly?

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

Start date: 12/11/2000
$10,000

12/11/2000
$1,014,300

12/09/2020
End date: 12/09/2020
Start price/share: $0.47
End price/share: $41.68
Starting shares: 21,276.60
Ending shares: 24,343.51
Dividends reinvested/share: $4.80
Total return: 10,046.37%
Average annual return: 25.97%
Starting investment: $10,000.00
Ending investment: $1,014,300.64

As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 25.97%. This would have turned a $10K investment made 20 years ago into $1,014,300.64 today (as of 12/09/2020). On a total return basis, that’s a result of 10,046.37% (something to think about: how might FLIR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that FLIR Systems, Inc. paid investors a total of $4.80/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 .68/share, we calculate that FLIR has a current yield of approximately 1.63%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .68 against the original $0.47/share purchase price. This works out to a yield on cost of 346.81%.

One more investment quote to leave you with:
“In the long run, we are all dead.” — John Maynard Keynes