“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 Morgan Stanley (NYSE: MS)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.
| Start date: | 10/01/2001 |
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| End date: | 09/27/2021 | ||||
| Start price/share: | $46.90 | ||||
| End price/share: | $105.10 | ||||
| Starting shares: | 213.22 | ||||
| Ending shares: | 370.14 | ||||
| Dividends reinvested/share: | $30.58 | ||||
| Total return: | 289.02% | ||||
| Average annual return: | 7.03% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $38,921.66 | ||||
As shown above, the twenty year investment result worked out well, with an annualized rate of return of 7.03%. This would have turned a $10K investment made 20 years ago into $38,921.66 today (as of 09/27/2021). On a total return basis, that’s a result of 289.02% (something to think about: how might MS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Morgan Stanley paid investors a total of $30.58/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 2.8/share, we calculate that MS has a current yield of approximately 2.66%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.8 against the original $46.90/share purchase price. This works out to a yield on cost of 5.67%.
One more investment quote to leave you with:
“When the public is most frightened, only the strong are left, and that’s when the market is in the best possible hands.” — Victor Niederhoffer
