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

— Warren Buffett

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a two-decade holding period for an investor who was considering Albemarle Corp. (NYSE: ALB) back in 2002, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 03/21/2002
$10,000

03/21/2002
$206,779

03/18/2022
End date: 03/18/2022
Start price/share: $13.09
End price/share: $198.24
Starting shares: 763.94
Ending shares: 1,042.29
Dividends reinvested/share: $16.89
Total return: 1,966.24%
Average annual return: 16.35%
Starting investment: $10,000.00
Ending investment: $206,779.72

As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 16.35%. This would have turned a $10K investment made 20 years ago into $206,779.72 today (as of 03/18/2022). On a total return basis, that’s a result of 1,966.24% (something to think about: how might ALB shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Albemarle Corp. paid investors a total of $16.89/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 1.58/share, we calculate that ALB has a current yield of approximately 0.80%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.58 against the original $13.09/share purchase price. This works out to a yield on cost of 6.11%.

One more investment quote to leave you with:
“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” — Charlie Munger