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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— 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 3M Co (NYSE: MMM) back in 2001: 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: 04/23/2001


End date: 04/21/2021
Start price/share: $58.15
End price/share: $200.88
Starting shares: 171.97
Ending shares: 285.34
Dividends reinvested/share: $58.80
Total return: 473.19%
Average annual return: 9.12%
Starting investment: $10,000.00
Ending investment: $57,332.21

As shown above, the two-decade investment result worked out well, with an annualized rate of return of 9.12%. This would have turned a $10K investment made 20 years ago into $57,332.21 today (as of 04/21/2021). On a total return basis, that’s a result of 473.19% (something to think about: how might MMM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that 3M Co paid investors a total of $58.80/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 5.92/share, we calculate that MMM has a current yield of approximately 2.95%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.92 against the original $58.15/share purchase price. This works out to a yield on cost of 5.07%.

One more piece of investment wisdom to leave you with:
“The four most dangerous words in investing are: ‘this time it’s different.'” — Sir John Templeton