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

— Warren Buffett

The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a twenty year period?

Today, let’s look backwards in time to 2001, and take a look at what happened to investors who asked that very question about Rockwell Automation, Inc. (NYSE: ROK), by taking a look at the investment outcome over a twenty year holding period.

Start date: 01/16/2001


End date: 01/12/2021
Start price/share: $46.94
End price/share: $265.47
Starting shares: 213.05
Ending shares: 869.39
Dividends reinvested/share: $60.63
Total return: 2,207.98%
Average annual return: 16.99%
Starting investment: $10,000.00
Ending investment: $230,760.53

The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 16.99%. This would have turned a $10K investment made 20 years ago into $230,760.53 today (as of 01/12/2021). On a total return basis, that’s a result of 2,207.98% (something to think about: how might ROK shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Rockwell Automation, Inc. paid investors a total of $60.63/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 4.28/share, we calculate that ROK has a current yield of approximately 1.61%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.28 against the original $46.94/share purchase price. This works out to a yield on cost of 3.43%.

One more piece of investment wisdom to leave you with:
“There’s a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions.” — Joel Greenblatt