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

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into American Express Co. (NYSE: AXP)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.

Start date: 07/20/2001
$10,000

07/20/2001
$65,174

07/19/2021
End date: 07/19/2021
Start price/share: $33.24
End price/share: $162.81
Starting shares: 300.84
Ending shares: 400.06
Dividends reinvested/share: $17.76
Total return: 551.33%
Average annual return: 9.82%
Starting investment: $10,000.00
Ending investment: $65,174.04

As we can see, the twenty year investment result worked out well, with an annualized rate of return of 9.82%. This would have turned a $10K investment made 20 years ago into $65,174.04 today (as of 07/19/2021). On a total return basis, that’s a result of 551.33% (something to think about: how might AXP shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that American Express Co. paid investors a total of $17.76/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 1.72/share, we calculate that AXP has a current yield of approximately 1.06%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.72 against the original $33.24/share purchase price. This works out to a yield on cost of 3.19%.

One more investment quote to leave you with:
“You can’t restate a dividend.” — Malon Wilkus