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

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Ford Motor Co. (NYSE: F)? Today, we examine the outcome of a two-decade investment into the stock back in 2002.

Start date: 03/25/2002


End date: 03/22/2022
Start price/share: $16.05
End price/share: $17.09
Starting shares: 623.05
Ending shares: 1,093.49
Dividends reinvested/share: $6.63
Total return: 86.88%
Average annual return: 3.18%
Starting investment: $10,000.00
Ending investment: $18,704.57

As we can see, the two-decade investment result worked out as follows, with an annualized rate of return of 3.18%. This would have turned a $10K investment made 20 years ago into $18,704.57 today (as of 03/22/2022). On a total return basis, that’s a result of 86.88% (something to think about: how might F shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Ford Motor Co. paid investors a total of $6.63/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/share, we calculate that F has a current yield of approximately 2.34%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .4 against the original $16.05/share purchase price. This works out to a yield on cost of 14.58%.

More investment wisdom to ponder:
“If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.” — Peter Lynch