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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 Morgan Stanley (NYSE: MS)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.

Start date: 02/26/2001


End date: 02/24/2021
Start price/share: $69.20
End price/share: $79.88
Starting shares: 144.51
Ending shares: 250.17
Dividends reinvested/share: $29.99
Total return: 99.84%
Average annual return: 3.52%
Starting investment: $10,000.00
Ending investment: $19,980.61

The above analysis shows the twenty year investment result worked out as follows, with an annualized rate of return of 3.52%. This would have turned a $10K investment made 20 years ago into $19,980.61 today (as of 02/24/2021). On a total return basis, that’s a result of 99.84% (something to think about: how might MS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Morgan Stanley paid investors a total of $29.99/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 1.4/share, we calculate that MS has a current yield of approximately 1.75%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.4 against the original $69.20/share purchase price. This works out to a yield on cost of 2.53%.

One more investment quote to leave you with:
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” — Benjamin Graham