“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Danaher Corp (NYSE: DHR)? Today, we examine the outcome of a two-decade investment into the stock back in 2001.
| Start date: | 07/27/2001 |
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| End date: | 07/26/2021 | ||||
| Start price/share: | $10.67 | ||||
| End price/share: | $290.18 | ||||
| Starting shares: | 937.21 | ||||
| Ending shares: | 995.55 | ||||
| Dividends reinvested/share: | $4.76 | ||||
| Total return: | 2,788.88% | ||||
| Average annual return: | 18.30% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $288,731.87 | ||||
As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 18.30%. This would have turned a $10K investment made 20 years ago into $288,731.87 today (as of 07/26/2021). On a total return basis, that’s a result of 2,788.88% (something to think about: how might DHR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Danaher Corp paid investors a total of $4.76/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 .84/share, we calculate that DHR has a current yield of approximately 0.29%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .84 against the original $10.67/share purchase price. This works out to a yield on cost of 2.72%.
Here’s one more great investment quote before you go:
“Though tempting, trying to time the market is a loser’s game.” — Christopher Davis
