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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 Martin Marietta Materials, Inc. (NYSE: MLM), by taking a look at the investment outcome over a twenty year holding period.

Start date: 03/19/2001


End date: 03/17/2021
Start price/share: $44.66
End price/share: $340.00
Starting shares: 223.91
Ending shares: 294.73
Dividends reinvested/share: $28.32
Total return: 902.08%
Average annual return: 12.21%
Starting investment: $10,000.00
Ending investment: $100,208.69

As we can see, the twenty year investment result worked out quite well, with an annualized rate of return of 12.21%. This would have turned a $10K investment made 20 years ago into $100,208.69 today (as of 03/17/2021). On a total return basis, that’s a result of 902.08% (something to think about: how might MLM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Martin Marietta Materials, Inc. paid investors a total of $28.32/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 2.28/share, we calculate that MLM has a current yield of approximately 0.67%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.28 against the original $44.66/share purchase price. This works out to a yield on cost of 1.50%.

Another great investment quote to think about:
“An investment in knowledge pays the best interest.” — Benjamin Franklin