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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— Warren Buffett

The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a two-decade period?

Today, let’s look backwards in time to 2001, and take a look at what happened to investors who asked that very question about United Parcel Service Inc (NYSE: UPS), by taking a look at the investment outcome over a two-decade holding period.

Start date: 09/04/2001


End date: 08/31/2021
Start price/share: $55.36
End price/share: $195.63
Starting shares: 180.64
Ending shares: 303.01
Dividends reinvested/share: $46.45
Total return: 492.77%
Average annual return: 9.30%
Starting investment: $10,000.00
Ending investment: $59,225.54

As shown above, the two-decade investment result worked out well, with an annualized rate of return of 9.30%. This would have turned a $10K investment made 20 years ago into $59,225.54 today (as of 08/31/2021). On a total return basis, that’s a result of 492.77% (something to think about: how might UPS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that United Parcel Service Inc paid investors a total of $46.45/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 4.08/share, we calculate that UPS has a current yield of approximately 2.09%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.08 against the original $55.36/share purchase price. This works out to a yield on cost of 3.78%.

Another great investment quote to think about:
“The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you’re wrong.” — William O’Neil