“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 Thermo Fisher Scientific Inc (NYSE: TMO)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.
| Start date: | 11/26/2001 |
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| End date: | 11/23/2021 | ||||
| Start price/share: | $22.38 | ||||
| End price/share: | $632.76 | ||||
| Starting shares: | 446.83 | ||||
| Ending shares: | 466.36 | ||||
| Dividends reinvested/share: | $6.64 | ||||
| Total return: | 2,850.93% | ||||
| Average annual return: | 18.43% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $294,874.43 | ||||
As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 18.43%. This would have turned a $10K investment made 20 years ago into $294,874.43 today (as of 11/23/2021). On a total return basis, that’s a result of 2,850.93% (something to think about: how might TMO shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Thermo Fisher Scientific Inc paid investors a total of $6.64/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 1.04/share, we calculate that TMO has a current yield of approximately 0.16%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.04 against the original $22.38/share purchase price. This works out to a yield on cost of 0.71%.
One more investment quote to leave you with:
“I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that.” — Jesse Livermore
