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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 two-decade 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 BorgWarner Inc (NYSE: BWA), by taking a look at the investment outcome over a two-decade holding period.

Start date: 06/08/2001


End date: 06/07/2021
Start price/share: $5.87
End price/share: $53.11
Starting shares: 1,703.58
Ending shares: 2,077.78
Dividends reinvested/share: $5.80
Total return: 1,003.51%
Average annual return: 12.75%
Starting investment: $10,000.00
Ending investment: $110,382.99

As we can see, the two-decade investment result worked out quite well, with an annualized rate of return of 12.75%. This would have turned a $10K investment made 20 years ago into $110,382.99 today (as of 06/07/2021). On a total return basis, that’s a result of 1,003.51% (something to think about: how might BWA shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that BorgWarner Inc paid investors a total of $5.80/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 .68/share, we calculate that BWA has a current yield of approximately 1.28%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .68 against the original $5.87/share purchase price. This works out to a yield on cost of 21.81%.

Here’s one more great investment quote before you go:
“Successful investing is anticipating the anticipations of others.” — John Maynard Keynes