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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 twenty year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into ONEOK Inc (NYSE: OKE) back in 2001: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.

Start date: 04/30/2001


End date: 04/29/2021
Start price/share: $9.46
End price/share: $52.60
Starting shares: 1,057.08
Ending shares: 2,619.22
Dividends reinvested/share: $30.23
Total return: 1,277.71%
Average annual return: 14.01%
Starting investment: $10,000.00
Ending investment: $137,874.18

The above analysis shows the twenty year investment result worked out quite well, with an annualized rate of return of 14.01%. This would have turned a $10K investment made 20 years ago into $137,874.18 today (as of 04/29/2021). On a total return basis, that’s a result of 1,277.71% (something to think about: how might OKE shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that ONEOK Inc paid investors a total of $30.23/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 3.74/share, we calculate that OKE has a current yield of approximately 7.11%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.74 against the original $9.46/share purchase price. This works out to a yield on cost of 75.16%.

One more investment quote to leave you with:
“Investors should purchase stocks like they purchase groceries, not like they purchase perfume.” — Benjamin Graham