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“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 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 Ford Motor Co. (NYSE: F)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.

Start date: 07/16/2001


End date: 07/15/2021
Start price/share: $25.00
End price/share: $14.01
Starting shares: 400.00
Ending shares: 714.51
Dividends reinvested/share: $6.98
Total return: 0.10%
Average annual return: 0.01%
Starting investment: $10,000.00
Ending investment: $10,020.03

As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 0.01%. This would have turned a $10K investment made 20 years ago into $10,020.03 today (as of 07/15/2021). On a total return basis, that’s a result of 0.10% (something to think about: how might F shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Ford Motor Co. paid investors a total of $6.98/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 .6/share, we calculate that F has a current yield of approximately 4.28%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .6 against the original $25.00/share purchase price. This works out to a yield on cost of 17.12%.

One more investment quote to leave you with:
“Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.” — Warren Buffett