“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 JPMorgan Chase & Co (NYSE: JPM)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.
| Start date: | 07/23/2001 |
|
|||
| End date: | 07/21/2021 | ||||
| Start price/share: | $43.01 | ||||
| End price/share: | $152.86 | ||||
| Starting shares: | 232.50 | ||||
| Ending shares: | 417.95 | ||||
| Dividends reinvested/share: | $33.34 | ||||
| Total return: | 538.88% | ||||
| Average annual return: | 9.71% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $63,863.85 | ||||
As shown above, the twenty year investment result worked out well, with an annualized rate of return of 9.71%. This would have turned a $10K investment made 20 years ago into $63,863.85 today (as of 07/21/2021). On a total return basis, that’s a result of 538.88% (something to think about: how might JPM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that JPMorgan Chase & Co paid investors a total of $33.34/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 3.6/share, we calculate that JPM has a current yield of approximately 2.36%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.6 against the original $43.01/share purchase price. This works out to a yield on cost of 5.49%.
More investment wisdom to ponder:
“Markets can remain irrational longer than you can remain solvent.” — John Maynard Keynes
