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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 twenty year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Rockwell Automation, Inc. (NYSE: ROK) 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: 06/04/2001


End date: 06/02/2021
Start price/share: $45.88
End price/share: $271.82
Starting shares: 217.96
Ending shares: 896.83
Dividends reinvested/share: $62.77
Total return: 2,337.75%
Average annual return: 17.31%
Starting investment: $10,000.00
Ending investment: $243,933.01

As we can see, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 17.31%. This would have turned a $10K investment made 20 years ago into $243,933.01 today (as of 06/02/2021). On a total return basis, that’s a result of 2,337.75% (something to think about: how might ROK shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Rockwell Automation, Inc. paid investors a total of $62.77/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 4.28/share, we calculate that ROK has a current yield of approximately 1.57%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.28 against the original $45.88/share purchase price. This works out to a yield on cost of 3.42%.

One more investment quote to leave you with:
“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” — Mark Cuban