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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 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