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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— 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 twenty year 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 AmerisourceBergen Corp. (NYSE: ABC), by taking a look at the investment outcome over a twenty year holding period.

Start date: 12/06/2001
$10,000

12/06/2001
$102,192

12/03/2021
End date: 12/03/2021
Start price/share: $14.63
End price/share: $116.76
Starting shares: 683.53
Ending shares: 875.20
Dividends reinvested/share: $15.33
Total return: 921.88%
Average annual return: 12.32%
Starting investment: $10,000.00
Ending investment: $102,192.35

As we can see, the twenty year investment result worked out quite well, with an annualized rate of return of 12.32%. This would have turned a $10K investment made 20 years ago into $102,192.35 today (as of 12/03/2021). On a total return basis, that’s a result of 921.88% (something to think about: how might ABC shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that AmerisourceBergen Corp. paid investors a total of $15.33/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 1.84/share, we calculate that ABC has a current yield of approximately 1.58%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.84 against the original $14.63/share purchase price. This works out to a yield on cost of 10.80%.

One more piece of investment wisdom to leave you with:
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham